Tesco purchase

I spent the weekend pondering Tesco, and studying their financials over the last 14 years. This morning I've made an initial purchase. Tesco now forms approximately 10% of my portfolio.

Briefly, the key points in Tesco's favour are:

• A return on reinvested earnings of approximately 14%.
• Price/Earnings ratio of 12.
• Extraordinarily consistent profitability.
• Very moderate debt.

The earnings yield is approximately 8%. I think we can expect that to be boosted to about 10% by the superior RoE. We can also expect that to increase with inflation, so that suggests a real rate of return of 10%, nominal 13%.

I think Tesco is in an extremely secure position to weather any short-term downturns, and I think that is an excellent base for its future growth.