Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Buffett vs. Woodford: Who's Winning on Tesco?

LONDON -- This time last year, Warren Buffett, the famous billionaire U.S. investor, and Neil Woodford, the ace U.K. fund manager, took polarized positions on the investment case for top FTSE 100 supermarket Tesco (LSE: TSCO  ) (NASDAQOTH: TSCDY  ) .

Tesco had just issued its first profit warning in 20 years. Woodford was a seller. Buffett was a buyer. Rarely have two such renowned investors been effectively at the opposite ends of the same trade.

One year on, which of these two master investors currently looks to have made the right call?

Buffett buys big
In the wake of Tesco's profit warning, Buffett acquired an interest in more than 150 million shares, increasing his stake in the company from 3.2% to 5.1%. Buffett did the trade by entering into a somewhat complex equity-swap deal. I'm going to take an average of the prevailing prices at the time -- a round-figure number of 320 pence -- and use that value to judge his performance. At last week's closing price of 350 pence, Buffett is 9% up on the trade.

Woodford spreads his bets
Was Woodford wrong to sell Tesco? Well, that rather depends on what he bought in its place. In the report of his Invesco Perpetual High Income fund covering Jan. 1 to June 30, 2012, Woodford told us:

There was relatively little trading activity during the period. The fund sold its holding in International Power ... and sold its holding in Tesco. ... It increased its holding in Capita (LSE: CPI  ) and also added to holdings in health care companies Elan, Sanofi (NYSE: SNY  ) and Smith & Nephew (LSE: SN  ) .

I've summarized Woodford's buys, the prices I calculate he bought at, and the returns to date in the table below.


Investment (millions of pounds)

Buy Price per Share

Share Price as of Jan. 18


Smith & Nephew


622 pence

697 pence




57 euros

72 euros









662 pence

798 pence


Total weighted return



There's not much in it, then, after one year: Buffett is up 9% on Tesco, but Woodford is slightly ahead with a weighted gain of 11% -- even though Elan has let him down badly so far.

What are the prospects for Tesco and Woodford's four companies in the coming year? The following table gives some forecast valuation data.



Earnings-per-Share Growth


Dividend Yield






Smith & Nephew




















N/A = not applicable due to negative earnings.

On these numbers, Tesco looks a clear "value" winner. The supermarket takes the top spot on a low price-to-earnings ratio and high yield. It also takes second place on earnings-per-share growth and P/E-to-EPS growth; in the case of the latter, low equals better value.

The next best pick on the numbers is outsourcing group Capita, which comes top on two measures: EPS growth and PEG.

If you're thinking of investing in Tesco, help yourself to a free and exclusive Motley Fool report that gives a full analysis of the company's prospects. This report will help you decide for yourself whether Buffett has bought a blue-chip bargain and whether Tesco's shares are still an attractive buy today. "The One U.K. Share Warren Buffett Loves" can be in your inbox in seconds -- simply click here.

You can also take the opportunity to grab yourself another free Motley Fool report: "8 Shares Held By Britain's Super Investor." You'll learn all about Woodford's enormously successful investing strategy and the biggest blue-chip dividend shares he currently favors. This report, too, can be in your inbox in seconds. As I say, it's 100% free, so what have you got to lose? Simply click here.

Read/Post Comments (4) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2208116, ~/Articles/ArticleHandler.aspx, 9/26/2016 11:49:00 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 hours ago Sponsored by:
DOW 18,094.83 -166.62 -0.91%
S&P 500 2,146.10 -18.59 -0.86%
NASD 5,257.49 -48.26 -0.91%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/26/2016 12:11 PM
CPI $981.50 Up +11.00 +1.13%
Capita Group CAPS Rating: No stars
SN $1251.05 Up +13.05 +1.05%
Smith & Nephew CAPS Rating: No stars
SNY $38.04 Down -0.31 -0.81%
Sanofi CAPS Rating: *****
TSCO $179.08 Up +2.63 +1.49%
Tesco CAPS Rating: No stars