By Bryce Elder and Neil Hume
Published: March 1 2010 08:57 | Last updated: March 1 2010 20:48
Tesco was among the FTSE 100’s top performers on Monday after Warren Buffett raised his stake.
Shares in the supermarket rose 3.2 per cent to 433p, their sharpest gain since May, after Mr Buffett said in a letter to Berkshire Hathaway shareholders that the holding had increased to 3 per cent.
America’s second-richest man has been gradually adding to his Tesco stake since first buying the stock in 2006 when the retailer announced plans to enter the US market. The latest purchase is believed to make him the sixth-biggest shareholder.
Tesco shares were also helped by an upgrade from JPMorgan Cazenove.
The risk of UK deflation looks to have passed and investment spending should fall significantly this year, the broker said. “After two years of no free cashflow generation in the UK, we expect £1bn in 2010/11 and £1.3bn in 2012-13, excluding Tesco Bank,” said analyst Jaime Vazquez.
He moved from “underweight” to “neutral” on Tesco stock, adding: “For the shares to outperform we believe the company would need to outperform its peers again in the UK, improve its capital turnover ratios internationally and prove it can boost free cashflow generation without impacting growth.”
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