Shares for your supermarket shopping list

The cost of a shopping cart full of groceries continues to rise, keeping inflation in the double digits. As a consumer, you are concerned about the impact of this on your budget – and that of tight households.

As an investor, you may be wondering what stocks you could buy to make these terms work in your favor.

Aldi and Lidl are now seen as the star discounters. Simple supermarkets have 9.4 percent and 7.1 percent of the UK grocery market respectively. But you can’t buy a share of either company, as both are private companies, the fiefs of billionaire German dynasties.

So much attention is being paid to Aldi and Lidl that it’s easy to forget that Tesco, a £20.2 billion behemoth, remains the dominant name with a 27.5 per cent share and Sainsbury’s has 15.5 per cent. Both have adeptly positioned themselves as the ally of the pressured shopper, with Sainsbury’s determined to give lower prices to Nectar cardholders.

This week the High Court ruled against Tesco’s Clubcard promotion, declaring it an attempt to mislead shoppers into believing prices were as low as Lidl’s.

But the supermarket giant can still rely on its Aldi Price Match and Low Everyday Prices campaigns.

Meanwhile, when food costs start to fall, Tesco, Sainsbury’s and the rest could be well positioned.

In the meantime, the big two will face less rivalry than before from Asda and Morrisons, as both are burdened with debt gobbled up by private equity groups.

There’s also less to fear from Waitrose, once the go-to place for extra treats.

It’s been supplanted in this important niche by Marks & Spencer, whose elegantly patriotic Coronation specials range seems to be ruling next month’s celebrations.

I bought M&S ​​shares last October. The subsequent 40 percent increase made me want to raise the flag, especially given Marks’ move to target the price-conscious with his “Notable” deals and yellow sticker discounts, which are featured on the social media feeds of cent pincher influencers.

Lately I’ve also been browsing the aisles of Tesco, whose shares are up 21 percent this year to 279 pence. Earnings prospects may be flat. But analysts at Barclays and JP Morgan still think investors should be overweight the stock, with Barclays setting a price target of 320 pence.

Shore Capital’s Clive Black also rates Tesco a buy, citing its 3.92 per cent dividend yield and new £750m share buyback program (which could boost shares further).

Based on this, I will add Tesco to my stock shopping list, but you already have a stake if you own funds such as Artemis Income, Jupiter Income, Jupiter UK Special Situations and SVM UK Opportunities.

Shares of Sainsbury’s are up 25 percent this year to 281.7 pence, and most analysts rate them as sustainable. Bargain hunting US groups are busy with British plc spending. But Sainsbury’s, a £6.94 billion company, is not at the center of the bidding speculation for now. Note, however, that Bestway has a 4.5 percent stake and might see Sainsbury’s as a great addition to its Costcutter division. The other major shareholders are the Qatar Investment Authority and Czech investor Daniel Kretinsky, head of Vesa Equity.

Those with money in funds like Schroder Income and Schroder Income Maximiser, who have stakes in Sainsbury’s, will hope that the fan base for its food, its Tu fashion and its homewares is about to expand. Demand for furniture and paint is stronger than expected, and the Argos and Habitat ranges offer a lot of pizzazz for less money.

B&M European Value, capitalized at £4.94bn, is perhaps best known for its cheap eats, but it’s also supplying the means for a super-scrimper makeover. B&M shares are up 17 percent this year to 492.7 pence, but analysts have set prices as high as 580 pence and are also on my shopping list.

Betting on the love of a bargain, whatever the economic climate, seems to be paying off, as evidenced by the 81% rise over the past five years in the shares of UK private equity giant 3i, which rose 16.6 billion pounds.

The biggest increase comes from the company’s 57 percent stake in discount chain Action, which has more than 2,000 outlets in 11 European countries.

Inflation in the UK looks likely to persist for a while. But even if it starts to take off, will the penchant for discount remain? Somehow I suspect so.