Buffett shops at Tesco for £120m stake

Warren Buffett has increased his stake in Tesco plc by £120m, according to a person familiar with the matter.

Berkshire Hathaway., Buffett's investment vehicle, bought 34 million shares in the group in the last week of August, valued at around $185.5m at the time, the person said, according to the Wall Street Journal.

The move reportedly raises Berkshire's stake in the group to 3.64% from 3.21%.

Buffett has previously criticised Tesco's move into the US market, where the company operates around 175 stores-mainly along the west coast of California but made an operating loss of £186m in the year ended 26 February.

However, the stake increase as the supermarket giant prepares to report on its first half-year under new chief executive Philip Clarke next week is likely to be seen as a vote of confidence in Clarke's tenure and strategy.

Berkshire Hathaway is Tesco's third-largest investor behind Blackrock, which has 5.5%, and Legal and General Investment Management, which has 4.01%, according to Factset.

Buffett's backing lifted Tesco's share price, with the stock closing 1.7% or 6.2p up, at 371p.

Meanwhile, Berkshire Hathaway is set to launch its first share buyback programme, with plans to purchase shares in the open market or through privately negotiated transactions, the BBC reports.

Berkshire said it would pay a maximum of a 10% premium on the current book value of the shares.

The move comes after repeated complaints from investors that the company's stock is undervalued.

"If we are correct in our opinion, repurchases will enhance the per-share intrinsic value of Berkshire shares, benefitting shareholders who retain their interest," the company said in a statement.

The company added it will use "cash on hand" to fund the repurchases, but would not allow its cash reserves to fall below $20bn.

Berkshire had almost $50bn of cash reserves as of 30 June, but has used almost $15bn on acquiring new business or making investments, including a $5bn stake in Bank of America.