The headline in the Financial Times was “Another commercial behemoth falls to earth” with a report that emphasised that Tesco (LONDON:TSCO)’s fall shows how free markets reliably dethrone the dominant. Joseph Schumpeter, one of the most influential economists of the 20th Century, coined the term “creative destruction” which denotes “a process of industrial mutation that …. incessantly destroys the old and creates the new”.
Creative Destruction in Action
We see it when ‘walk on water’ CEOs retire and their successors catch the mess that was left behind. In the case of Tesco, once so dominant that politicians talked about how to prevent the Tesco-isation of a Britain dotted with “Tesco towns” as the UK’s leading grocer continued to expand, the mess included over-expansion at home and abroad. In the USA the Fresh & Easy chain filed for bankruptcy in 2013 and there were problems in the Tesco developments in China, Korea, Poland and Korea, to name just a few.
The Share Price Picture
Point A (Red) is the highest price at 492p on 14/11/07, Point B (Blue) is at 378.3p on 18/09/13 when other technical analysis factors showed that a fall to around 300p ( a blue line) was almost certain and the target below that was around 180p (a lower blue line). Mea culpa, I knew that and told colleagues so but did not broadcast it at the time. Point C (Green) was the lowest end of day price at 164.8p on 15/12/14.
The fundamental analysts don’t recognise the rebound and are still forecasting a projected EPS growth of minus 63.79%.
So What?
I think that around 180p was/is a massive support level and the bounce off it confirms that potentially, a word much used by Brian Marber, who for six years was voted the No.1 technical analyst in the City, the worst has passed.
Disclaimer: This material is published by Raymond James Investment Services Limited (RJIS) for information purposes only and should not be regarded as providing any specific advice. Opinions constitute our judgement of this date and are subject to change without warning.