The prospects of a second stock market crash and hard Brexit are weighing heavily on the outlook for the stock market right now. However, I think Tesco (LSE: TSCO) shares could be the perfect investment to navigate this uncertainty. Today, I’m going to try and explain why.
Tesco shares for uncertain times
As the UK’s largest supermarket group, Tesco is a relatively defensive enterprise. People will always need to eat and drink. For many customers, a Tesco is the nearest store for them to acquire these goods. Even at the height of the coronavirus lockdown, the retailer performed well. The group had to hire tens of thousands of new staff to cope with demand.
Sales surged as customers relied on the organisation to provide necessities in the time of crisis. Tesco shares also performed well compared to the rest of the market.
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I think it’s highly likely the business will benefit from the same rising demand in a second lockdown — if there is one.
In the event of a no-deal Brexit, Tesco will also remain the go-to retailer for many customers. People aren’t going to stop eating and drinking due to Brexit. The group might have to deal with higher costs due to additional logistical challenges. Still, as the largest retailer in the UK, I think the company can cope with these challenges.
As well as its Tesco stores, the group also owns wholesaler Booker. This organisation is responsible for supplying thousands of small corner shops around the UK, which may give the organisation yet another competitive advantage.
Even if customers move away from Tesco’s flagship stores towards smaller competitors, the overall business will still be able to benefit through its wholesale distribution arm.
Defending against a stock market crash
Considering all of the above, I think it may be worth buying Tesco shares for a retirement portfolio. The best long-term buy-and-forget investments are those that investors can depend on year after year. I reckon Tesco falls into this basket.
What’s more, the company’s earnings and dividend should rise steadily over the long term in line with inflation.
Over the past three years, the stock has returned 8.8% per annum for investors, including dividends. I see no reason why the business cannot continue to earn this kind of return as we advance through a combination of income and capital growth.
According to my figures, at this rate of return, it may be possible to turn an investment of £100,000 into a financial nest egg of over £2m within 35 years.
That’s why I think Tesco shares could be one of the best assets to buy right now for the long term.
The defensive nature of the group’s operations, its large footprint and economies of scale, should help Tesco earn a consistent stream of profits no matter what the world throws at it during the next couple of decades.
