Broker snap: Tradenext recommends defensive retailers Tesco and Dixons

20th Jun 2013 10:50

Tradenext recommends investors to pick up shares of retailers Tesco and Dixons for their defensive properties in the midst of the market sell-off on Thursday."Tesco with its defensive qualities, massive economies of scale, multi-billion pound freehold property portfolio, 4.0% plus dividend yield and having Warren Buffett as a major shareholder should see the shares find plentiful support, offering plenty of potential upside as well as decent dividend income in this low interest rate environment," said Head of Strategy Ronnie Chopra.He highlighted that UK retail sales figures announced on Thursday were much better than expected, growing by 2.1% month-on-month in May, ahead of the 1.0% estimate.The broker expects Tesco's share price to reach 400p by the end of the year, ahead of 344.6p by Wednesday's close. On Thursday morning however, the stock was down 2.12% at 337.3p, more or less in line with the wider FTSE 100 as market come under pressure on the back of concerns over US stimulus."With the FTSE 100 nursing a triple-digit fall, it is days like this that solid, defensive companies like Tesco should be picked up," Chopra said. Consumer electrical retailer Dixons meanwhile reported better-than-expected full-year results on Thursday with profits up 39% in the UK and Ireland as group costs reduced by £45m."The demise of Comet has continued to benefit Dixons, and with the company now in a net cash position the shares should continue to perform strongly as cost-cutting and higher revenues will boost profits over the next 12 months," Chopra said."The company has been transformed from survivor to winner over the last couple of years and is going from strength to strength." Tradenext has a year-end target of 60p, ahead of the previous close of 42.33p. This stock was up 2.5% on Thursday morning at 43.49p.