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MARKET REPORT: Warren Buffett eyes up Tesco's shares

When your biggest fan is Warren Buffett, affectionately known as the Sage of Omaha and widely considered to be the world’s most successful investor, what else is there to worry about?

He already sits on 5.1 per cent of Tesco’s equity and speculation is rife that he has been bidding UK institutions for stock, with a view to increase his shareholding to 10 per cent.

That helped of the UK’s number one supermarket rise 5.1p to 374.275p on meaty turnover of 13m. A Daily Mail exclusive on Saturday revealed Tesco boss Philip Clarke and his management team are expected to miss out on their annual bonuses following a disappointing year in which group profits are set to fall for the first time in 20 years.

In January 2012, Buffett spent £480m on Tesco’s shares at 323p, upping his stake to 5.08 per cent from 3.2 per cent, after it announced its first profits warning in living memory. It prompted the biggest one-day fall in stock since 1988. Buffet is sitting on a big return on his original investment and now wants to double up.

Shore Capital has advised clients to buy. The broker responded to reports that Tesco may be facing a £1bn exit cost from the closure of its Fresh & Easy business in the US. It suggested the exit is a story of the prior management rather than the present team.

The broker added that chief executive Philip Clarke deserves credit for his decision to withdraw from the US and his subsequent focus upon making the most from the group that retains strong cash generative capabilities, a robust balance sheet and leading market positions in most of its trading territories.

  More... FTSE CLOSE: Market rises after worst weekly loss in five months; mining stocks up

The Footsie regained composure after Friday’s hefty fall. Confidence in the US recovery was dealt a blow when disappointing jobs data pointed to another slowdown in the second quarter. But it rallied 27.16 points to 6,276.94, while the FTSE 250 picked up 43.5 points to 13,523.71. Wall Street lost a further 49 points in early trading with bulls hoping that aluminium giant Alcoa would kick off first-quarter earnings season in fine style.

Bullish comments from Bank of America/Merrill Lynch pumped up the volume at Weir, 92p better at 2274.5p.

Cairn Energy gushed 9p more to 282p amid speculation that David Einhorn, who runs hedge fund Greenlight Capital, has increased his stake above 3 per cent. Rumours have been rife of late that Cairn India is lining up a cash bid for its former parent.

Africa focused Tullow Oil reflected revived bid talk with a gain of 37p at 1191p. Premier Oil jumped 22.2p to 385p after announcing that its 30pc owned Luno 11 exploration well in the Norwegian North Sea has made a potentially significant oil discovery. Xcite Energy rose 9p to 118p after announcing an increase in oil reserves at its Bentley field in the North Sea.

The company forecasts a peak production rate of 45,000 stock tank barrels per day in the first phase of development, rising to 57,000 in the second phase.

Domestic banks came under pressure on renewed eurozone concerns. The decision by Portugal’s high court to reject some of the austerity measures that are part of the country’s bailout reminded investors that the debt crisis within the eurozone is not going away. Partly state-owned banks Lloyds Banking Group cheapened 0.71p to 46.3p and Royal Bank of Scotland eased 3.4p to 266.10p. Barclays dipped 2.8p to 277.2p.

Yet another profits warnings from beleaguered European publisher Mecom saw the shares crash 28.75p or 34.33 per cent to 55.p. The company, which was formerly run by ex-Mirror Group chief executive David Montgomery, revealed that advertising revenues will plummet more than 20 per centc in March and April.

Last month the company reported a loss of £25.9m and said that advertising revenues at its flagship Dutch operation, Wegener, had collapsed 28 per cent in January and February. Broker Canaccord Genuity downgraded to hold from buy and slashed its target price to 89p from 151p. Gemfields lost 4.75p to 25.625p on fears that the Zambia government’s potential ban on overseas auctioning of gemstones could depress revenues at its core Kagem emerald mine in North Zambia.

Following the successful demerger of its network-based managed services business to a new company called Redcentric, shares of Redstone were readjusted and closed at 2.25p, down 7.5p on Friday’s close.

Gooch & Housego, the specialist manufacturer of optical components and systems, advanced 15p to 455p after confirming that trading in the last six months has been in line with expectations. The order book at the end of March stood at £29.6m, up 19 per cent from the start of the year. Quindell Portfolio edged up 0.25p to 13.55p after saying it remains on track to meet full-year forecasts. They reported a 350 per cent leap in first-quarter earnings to £25m. A Canaccord Genuity recommendation and target price of 275p helped Nanoco improve 2p to 148.25p.

Broker Panmure Gordon has advised clients to buy Landore Resources up to 12p after the company rolled out further positive drill results on its nickel-copper Junior Lake project which is based in Canada.

It said it has significant exploration potential and activities this year and will concentrate on advancing the existing defined resource base towards production.

The close was 0.25p dearer at 4.125p which compares with the year’s high of 10p.

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