£20 Says You Should Be Buying Tesco PLC

In his popular book, One Up On Wall Street, famed US fund manager Peter Lynch advised investors to look ‘close to home’ for their investment opportunities.

Although this advice hasn’t always panned out in recent years, there’s no doubt that there is some truth in Mr Lynch’s underlying tescopoint: observant, thoughtful investors can sometimes spot buying opportunities in their everyday life, before they become City favourites.

One such opportunity, in my view, is Tesco (LSE: TSCO).

An Aldi affair

Several years ago, my wife and I made the switch from Tesco to Aldi, mainly because staple buys were so much cheaper than at Tesco. We started to visit Tesco only every few weeks, for items we couldn’t get at Aldi.

However, things change. We’ve noticed that Tesco’s prices on many of our staple purchases have gradually crept down to Aldi levels. The firm’s latest round of price cuts, announced last week, was another step forwards in terms of price matching.

Tesco’s secret sauce

All this time, of course, we’ve carried on using our Clubcard on our irregular visits to Tesco — and here’s the clever bit.

Within a few days of Tesco’s latest, well-publicised, price cuts, we received a Clubcard letter in the post, offering us a £20 coupon if we spend £35 per week at Tesco for the next four weeks.

Tesco’s marketing department is basically saying, “Look, try us again, and see if we’re cheap enough. If we’re not, then the £20 should cover the difference, so you’ve got nothing to lose”.

I admit it: as a result of this offer, we’re toying with the idea of doing a few full shops at Tesco, to see how the prices compare with Aldi, and to enjoy the convenience of only shopping at one supermarket.

I’m not the only one

I reckon that if a sceptical Fool like me is thinking about spending more at Tesco, there’s a good chance that many of Tesco’s other customers will be doing the same. Indeed, I suspect that this could be the start of a turnaround for Tesco.

Tesco’s immediate challenge is to reverse its falling sales. Tesco’s strong historic margins mean that it can afford to reduce its profit margins to boost sales, and the signs suggest that’s exactly what’s happening.

It’s cheap, buy it

Tesco shares currently trade on a forecast P/E of 11, and offer a prospective yield of 4.7%.

In my view, that's a special offer you shouldn't miss -- and I'm not the only Fool who rates Tesco as a strong buy.

The Motley Fool's expert analysts recently selected Tesco for their latest exclusive wealth report, "The Motley Fool's Five Shares To Retire On".

They said Tesco's current share price offers 'an appealing discount' and I reckon that the four other stocks in the report -- all of which are first-class dividend growth opportunities -- are equally attractive.

This report is FREE and carries no obligation. To get your copy today, simply click here now.

Both Roland and The Motley Fool own shares in Tesco.