Back The Boss, Not The Firm: Should You Buy Tesco PLC & Barclays PLC?

Tesco PLC (LON:TSCO) and Barclays PLC (LON:BARC) both have new chairmen with big reputations. Will they succeed where their predecessors failed?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Warren Buffett famously said that when a good manager meets a bad business, it’s the manager’s reputation which suffers.

I’m paraphrasing slightly, but Mr Buffett’s point was that it’s less risky to buy firms with good fundamentals than to pin your hopes on difficult turnaround situations.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

It’s a good principle, but as with any rule, there are times when it’s worth questioning.

In my own portfolio, I believe recent boardroom changes could make a big difference at both Tesco (LSE: TSCO) (NASDAQOTH: TSCDY.US) and Barclays (LSE: BARC) (NYSE: BCS.US).


The sudden departure of Barclays’ chief executive Antony Jenkins has come sooner than expected, but is not a surprise.

Barclays’ new chairman, John McFarlane, is known as ‘Mac the knife’ for good reason.

On 17 July, after less than three months in the role of non-executive chairman, Mr McFarlane will become executive chairman of Barclays — effectively both chairman and chief executive. He will be in charge of all aspects of the bank’s strategy and operations.

Shares in Barclays have risen by 4% since the news became public.

The City has high hopes that Mr McFarlane will be able to repeat the successes of his time at insurer Aviva. In less than three years, Mr McFarlane presided over a 95% rise in Aviva’s share price, thanks to a ruthlessly effective turnaround plan (and a new chief executive).

Mr McFarlane delivered similar results in his previous role as chief executive of Australia and New Zealand Banking Group Limited.

Many investors, including me, bought shares in Barclays for their deep discount to book value and low valuation relative to historic earnings.

We’ll now have to wait to see if Mr McFarlane’s arrival is the catalyst needed to complete the bank’s recovery.


Tesco’s problems have been well documented. Yet the firm remains the UK’s largest supermarket, with 28.6% of the grocery market. That’s more than Wm Morrison Supermarkets and J Sainsbury combined.

Tesco has both a new chairman, John Allan, and a newish chief executive, Dave Lewis. Mr Lewis has a sterling track record from his time as a product chief at Unilever, but it’s Mr Allan I want to focus on here.

His most recent role was as chairman of Dixons Carphone, where he oversaw the merger between Dixons and Carphone Warehouse. Shares in the newly-merged company have risen by 32% since the merger completed, in August 2014.

Earlier in his career, Mr Allan was chief executive of logistics firms Ocean Group and then of Exel plc, which he created by merging Ocean with NFC in 2000. Exel was then sold to Deutsche Post in 2005. Mr Allan clearly has a track record of transforming large, manpower-intensive organisations.

Tesco shares currently trade on a 2015/16 forecast P/E of 23, and offer a forecast yield of less than 1%.

Net debt of £9.9bn is far too high.

On the face of it, this isn’t an attractive prospect.

However, I doubt that Mr Allan would have accepted this role if he thought that Tesco was a business doomed to a gradual decline.

I expect to see further changes in the supermarket sector, and suspect that with the help of its new management team, Tesco may be one of the eventual winners.

For me, Tesco remains a long-term hold.

More on Investing Articles

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Could I make big buck with cheap Aston Martin shares?

Aston Martin shares plunged nearly 10% on Thursday morning amid rumours of another capital raise. But, maybe now is a…

Read more »

Risk reward ratio / risk management concept
Investing Articles

A top penny stock to buy in July

Penny stocks can carry higher risk for investors than larger companies. However, here is one low-cost UK share I think…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

Why 2022 could turn out a great year for buying growth shares

The appetite for growth shares appears to have waned in 2022, as the US Nasdaq has hit a bear market.…

Read more »

Piggy bank group pastel color background
Investing Articles

Should I buy PayPal stock in July?

The PayPal share price has fallen quite a long way from its all-time high. So, could July present a buying…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

2 great FTSE 100 stocks to own heading into a recession

Jabran Khan identifies two FTSE 100 stocks he feels are recession-proof and details their defensive capabilities.

Read more »

Young black woman in a wheelchair working online from home
Investing Articles

The Lloyds share price is down. Where will it go next?

In this article, this Fool looks at where the Lloyds share price could be heading, and whether it can return…

Read more »

positive mental health woman
Investing Articles

Waiting for a stock market recovery? I’m not

I'm not in a hurry for a stock market recovery. In fact, I think market volatility can be good for…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

My Stocks and Shares ISA has tanked this year! Here’s what I’m doing

As a long-term investor, I shouldn't be too bothered by short-term losses in my Stocks & Shares ISA. But it's…

Read more »