Glance at the big market board this past Thursday morning and you would be greeted by a whole sea of red, as the global sell-off sent UK Index stocks lower en masse. But, curiously, a few big names proved resilient to the turbulence. What makes some names move higher when the markets collapse?

One key stock that I paid attention to was Tesco. While shares of its UK Index rival Sainsbury fell -1.64%, and the overall benchmark index fell 138 points to trade as low as 6998 (6-month lows), Tesco bucked the trend and finished the day on a positive note.

What makes it more impressive was the fact that Tesco also paid a 1.67p/0.8% dividend the same day. With stocks going ex-dividend, the rule of thumb is that the shares tend to fall by the amount of the dividend. Instead, Tesco shares went the other way and, instead of falling 0.8%, actually rose +1%. Impressive!

Typically, stocks move sharply against the market when there is positive countervailing announcement or trend that is helping the shares buck the negative sentiment. For example, all the big gold & silver Miners were up on Thursday (Centamin +8%, Randgold +8.3%, Hochschild +5.2%) as the price of precious metals rose together with demand for safe-havens amidst market turbulence (spot gold +2.53% on Thursday).

What made Tesco so resilient to the global sell-off? Well, sometimes shares are just too cheap and undervalued to go any lower, even when the overall markets are downbeat.

Tesco’s half-year results last week missed market expectations (operating profit £933m vs. £992m consensus), with trading in Asia declining 29%. Tesco shares fell 8.6% on such disappointing results and the supermarket is down 18% today from 2018 highs (just +4.8% year-to-date).

With a drop as large as that, the market may have viewed Tesco shares as undervalued, hence why it has not reacted as negatively as other supermarkets to the latest bear market. In fact, many market analysts appear to be bullish on Tesco despite poor results.

In fact, in a latest survey of market consensus by Bloomberg, an impressive 82% of market analysts see a share price upside for Tesco from current levels (consensus holds for a medium-term target price of 257p, a 17% upside from today’s mid-day share price). Tesco shares have already bounced 5% from this week’s lows. Will the latest gains be erased in a correction, or can Tesco go back to 266p August highs?

Even in the most bearish of markets, there are plenty of exciting tradable opportunities to take advantage of. And not just in bottom-picking or trying to catch a falling knife. If you do genuine research, scout the market for solid bargain opportunities, analyse charts and technical indicators, then finding solid undervalued opportunities in shares is possible even when UK Index index as a whole is trending down.

At Accendo Markets, we do that kind of research and scouting every day. And we don’t just look at the big names like Tesco, but at the entire stable of UK Index blue chips and mid-caps. You too can benefit from our research by simply clicking here to  access our research and trade ideas.

Amrit Panesar, Senior Trader, 12 October 2018