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Stock market crash: why I’d buy the Tesco share price

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The Tesco (LSE: TSCO) share price plunged in the recent stock market crash. Since then, investor sentiment towards the retailer has remained depressed.

However, I think this could be an excellent opportunity to snap up some discounted shares in this retail giant. Today I’m going to explain why.

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Tesco share price on offer

Tesco is one of the few companies that has seen an increase in sales during a coronavirus crisis. The business supplied the UK throughout the situation. Despite coming under a tremendous amount of pressure, the retailer ensured the country didn’t run out of food.

To meet booming demand, Tesco has also been on a hiring spree. It recently announced the hiring of 16,000 new full-time employees to help meet the increased demand for online delivery.

The group is perfectly placed to benefit from the growing online demand from customers. Its massive store estate, warehouses and distribution network, are second to none among UK retailers. Ocado‘s robotic warehouses might have made headlines, but Tesco’s advantage over the rest of the industry is its size.

These competitive advantages allow the company to earn attractive profit margins. It recently hit a multi-year goal to increase operating profit margins to 4%. In comparison, despite the buzz surrounding the business, Ocado is still loss-making. In the UK’s viciously competitive food retail market, Tesco stands out as being able to offer prices competitors can’t match and still earn a profit.

Stock market crash bargain

The company’s competitive advantages suggest to me that the Tesco share price could be an excellent long-term investment. While the firm is facing competition from upstarts like Ocado and online retail giant Amazon, Tesco controls nearly a third of the UK retail market.

Thanks to the company’s size and brand recognition, I think it can maintain this position in the market for decades to come.

After this year’s stock market crash, the Tesco share price is trading around 10% below its 52-week high. I think this could be an excellent opportunity for investors to snap up a share of the retailer at a discount price.

Indeed, while the stock has languished this year, as noted above, the company’s underlying business has prospered. This suggests the shares offer a wide margin of safety at current levels.

Unlike other FTSE 100 stocks, Tesco has also stood by its dividend. The stock currently offers a dividend yield of 4.2%, which looks attractive in the current interest rate environment. It’s even higher than the FTSE 100 average of around 3.6%.

As such, investors who are looking for a stock market crash bargain could do well to take a closer look at the Tesco share price. The company’s competitive advantages have helped it weather the coronavirus storm and should put it on track to generate large total returns for investors in the long run.

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Rupert Hargreaves owns no share mentioned. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Tesco and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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