Buy when the price falls, says the sage. And he did.
The debate about Tesco (LSE: TSCO) has been raging here at TMF after the UK's biggest supermarket issued its first profit warning in more than 20 years of trading, leading to 20% being lopped off the price of what is widely considered one of the best defensive shares on the market.
And though many still think Tesco is the bee's knees, my Foolish colleague Prabhat Sakya took a critical look at the other side of the coin this week. Even if you're still bullish, it's vital to examine the downside of any potential investment, and the debate that ensued was rather lively.
Now, perhaps Tesco's most famous investor has once more stepped into the fray. Having held Tesco shares since at least 2007, Warren Buffett bought another chunk last September at around the 370p mark, taking his stake in the company to 3.6%. As recently as November, he was quoted as saying "If the price came down some on Tesco, I'd buy some more of that."
And when it fell last week, that's exactly what he did. Though the news has only come to light, Mr Buffett's investment vehicle, Berkshire Hathaway, invested heavily on the day of the profit warning, and again a day later, on January 13. That takes Berkshire Hathaway's total stake to 5.1%, and is a pretty good example of putting your money where your mouth is.
Vote of confidence
Tesco's new chief executive Philip Clarke came under pressure when the warning took the market by surprise, after predicting no profit growth next year as the company plans to plough some £400 million back into its UK stores to reinvigorate its fight for market share.
But this latest move by Warren Buffett, who takes a much longer view of things than the average stock market pundit, will come as a welcome bit of support for him.
And it hasn't done the share price any harm either, as it perked up around 4p on the news. Admittedly, it's only a small jump, but it's a welcome respite from the doom and gloom that has been pushing the price down all week.
What side of the Tesco divide are you one? Are you a pumper or a dumper? Do share your thoughts, below.
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> The Motley Fool owns shares in Tesco.