Following his investment in Tesco Plc, I doubt that shares of Woolworths Limited (ASX: WOW) would interest Warren Buffett.
What happened with Tesco?
In 2014, Buffett admitted that he made a great mistake buying Tesco, a UK-based supermarket operator. Tesco shares have fallen 60% in 10 years.
Buffett purchased 5% of all Tesco shares before selling at a $444 million loss.
Is Woolworths a Buffett stock?
Although Buffett may feel a little sick when he thinks about Tesco, I doubt Woolworths would make it into a Buffett portfolio today for the following reasons.
Competitive advantage.
One of the key features which Buffett and Charlie Munger look for in the companies they buy is a competitive advantage. This is a feature of a business that makes it resilient under competition.
If you asked someone 10 years ago if Woolworths, Australia's largest supermarket chain, had a competitive advantage the answer would have been a resounding "yes". However, with the arrival of Aldi, a price war with Coles and Metcash, and the uncertainty over the arrival of Amazon; Woolworths' competitive advantage appears to be under immense pressure.
Valuation
Buffett is a long-term value investor, with an eye for quality.
The Woolworths share price had fallen in recent times only to recover to its current level of $26. However, despite the fall, at today's prices, I think Woolworths shares are fair value.
That is, they are not a standout buy or a sell, in my book.
Therefore, I doubt Buffett would be in a rush to buy Woolworths shares today.
