Neil Woodford’s latest purchase of WM Morrison Supermarkets P L C (LON:MRW) makes him the company’s largest shareholder. This move is in stark contrast to Woodford’s exit from Tesco (LON:TSCO) just over a year ago. We know that Warren Buffett prefers Tesco, so which supermarket is the better investment?
Before I get into the details, I have to admit that sometimes I feel sorry for Neil Woodford. Sometimes… but not very often. The poor man has every move scrutinised to the nth degree by commentators everywhere, and recently I seem to have become one of them.
More than anything this is because I’m interested in the same sort of large, high quality, dividend paying companies, and Woodford effectively walks around with a target painted on his back as the UK’s uber-investor.
It’s also that Woodford is a man whose approach to investing is one that I usually admire. He generally runs a concentrated portfolio, he takes very long-term positions (with a holding period typically measured in years rather than the industry average of several months), and he actively tries to improve the businesses in which he invests, rather than just being a passive trader of shares.
But he isn’t always right, so it’s instructive to see how his moves compare to your own thinking, or in this case, my thinking.
Morrisons vs Tesco
I guess it’s pretty obvious that these business are very similar. In both cases the core business is supermarkets, which is unsurprisingly a fairly defensive industry, where investors can generally expect reliable profits and dividends.
Of course there are many differences between the two companies as well, of which I’d say Tesco’s wide international presence is perhaps the most significant. However, I’m not going to focus on the nuances of strategy, market focus, strengths, weaknesses, opportunities, threats and all the rest of it.
A core part of my investment philosophy is that economies, industries and companies are for the most part unpredictable.
They are complex adaptive systems, and they exist in a world full of thousands of other companies, each of which is also a complex adaptive system, and together they make up the universe of companies, which in total is a hugely complex adaptive system which nobody and nothing can predict…