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If I’d invested £1,000 in Tesco shares at the start of 2022, here’s what I’d have now


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So far this year, stock market volatility gave me a lot of headaches. To be fair, a lot of it was out of my control, with events like the war in Ukraine, spiraling energy prices, and the hangover pandemic. In January, I considered investing in the Tesco (LSE:TSCO) — if I did, what would my shares look like now?

Comparing all the numbers

I guess I would invest £1000 on the first trading day of the year. By my calculations, it opened at 290p. The share price is currently 255 pence. This means Tesco shares are down 12% year-to-date. My £1000 will cost £880.

Obviously, the unrealized loss isn’t much, but I’m primarily wondering how it measures up on a relative level. My usual benchmark for performance in this case is the FTSE 100. In early January, the index opened just below 7,400 points. Now it is 7301 points. Therefore, the loss of the index in 2022 will be 1.34%.

What about other peers? J Sainsbury decreases by 23.6%, with The Ocado Group decreased by 55.3%. So what I can gather from all this information is that the supermarket/grocery sector has underperformed the overall market this year. However, Tesco was one of the best performers in the sector itself.

Risk and reward with Tesco shares

One of the main risks I see going forward for Tesco is cost inflation. It has already flagged concerns on the matter in its Q1 trading report. The general director commented on this “We are seeing some early signs of changing customer behavior as a result of the inflationary environment.”

I think this is one of the reasons why the share price has fallen this year. However, I believe that it will only get worse in the winter, and inflation is still far from peaking. As a result, Tesco could find itself with reduced profitability if the full impact of the price increase is not passed on directly to the consumer.

The adjusted operating profit margin over the past year was only 2.9%, so there is not much room for higher costs.

On the other hand, Tesco shares could recover some losses before the end of the year due to their role as a defensive stock. Historically, during economic downturns, people cut back on spending. Although supermarkets are also affected, these firms are less affected than other sectors. This is because the food and drinks sold are essential items for all of us. So even if I cut back on some luxury items, I will always make sure I have money to spend at Tesco on my grocery shop.

From this perspective, investors may be flocking to Tesco shares, almost as a safer place to stash money than some riskier growth ideas.

All in all, if I had invested in Tesco at the start of the year, I would have taken the plunge. Even if I had invested exactly a year ago, I would still be down 2.4%. However, for a defensive stock role going forward, it’s on my watch list to potentially buy later this year.

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