Beginner's Portfolio: We Buy More Shares

This article is the latest in a series that aims to help novice investors with the stock market. To enjoy past articles in the series, please visit our full archive.

LONDON -- So, we've bought our first share for the Beginners' Portfolio in the shape of Vodafone. Thank you for your comments and suggestions. There are some great ones there, and they're very much in line with my thinking.

Now it's time to make another purchase for our portfolio.

But before I go on to reveal what it is, we have a Motley Fool report that I think makes a good accompaniment to this series. Called "What Every New Investor Needs To Know," it looks at some of the basics for investment beginners, and I'd certainly recommend you get a copy.

Anyway, there are some great companies around, but I don't think our portfolio could be complete without Tesco (OTC: TSCDY), so now it has some shares of Britain's biggest supermarket added to it.

The purchase

As you can see, our 500 pound investment got us 159 shares at 305.5 pence, with commission and stamp duty bringing the total up to 498.23 pounds. That makes our fledgling portfolio look like this:

Why Tesco? There are a number of reasons.

Tesco accounts for around 30% of the U.K.'s supermarket sales every year, which is really a staggering amount of stuff being sold. And it's also a canny overseas investor, able to spot opportunities and make the most of them when they happen -- like getting into Asian markets cheaply when that region of the world was going through a rough economic patch.

Some will be concerned about Tesco's recent fall from grace following a disappointing pre-Christmas sales period when it failed to match its competitors' promotions and didn't get the footfall it wanted. Subsequently, we are now expecting a year or two of refocus in the U.K.

It's in bargain territory now
The shares have lost 25% of their value since their pre-Christmas price. But I reckon that makes this a great time to buy, provided the fundamental business is still sound -- which I think it is. Even though profits are now forecast to be flat for the year ending February 2013, there's still a 5% dividend forecast, and that will do us nicely until the shares start to recover.

Another reason for buying Tesco is that we should be expecting it to appear in the news quite a bit over the coming months, which will give us the opportunity to observe it and ponder any decisions investors might make. That's not usually an issue for a purchase decision, but this one is about education more than anything, and we won't learn as much by buying a company we don't hear a peep about from one year end to the next.

And a final reason for buying Tesco is that Warren Buffett is a big shareholder, and he's usually worth listening to. The Motley Fool report "The One UK Share That Warren Buffett Loves" covers his reasons for buying Tesco in some detail, and you should find that of educational value.

More in this series:

• Beginners' Portfolio: First Purchase
• How To Come Up With Investing Ideas
• How To Build A Portfolio