Merrill Lynch prefers Tesco

Tesco has got the thumbs up from Merrill Lynch with the brokers tipping the stock as a long-term buy. It is the obvious long-term, core British holding for investors, with the business capable of delivering sustained growth, according to the brokers. It is trading exceptionally well in Britain and the brokers are preparing to raise its forecasts for the group's earnings. The premium to Sainsbury and Safeway has shrunk from 50 per cent to 20 per cent since the start of the year.

Merrill Lynch suggests the shares are poised to improve.