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business newsSilver Lining: Best Buy? You Bet It Is
Circuit City collapse makes this the electronics epicenter.
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My family won't have to worry about doing this much longer, because -- as most gadget aficionados already know -- Circuit City is in the process of closing its doors.
So where’s the silver lining?
The elimination of Circuit City means that Best Buy will likely become the epicenter in the world of retail consumer electronics, and possibly the apple of analysts' eyes. In fact, I think we may already be seeing that happen.
For example, did you know that Best Buy’s share price has actually ticked up since early December 2008, despite all the gloom in retail? Just take a gander at the following chart.
And most recently, the company received some extra lovin' as it was reportedly named to the Conviction List at Goldman Sachs.
As the year progresses, I think there’s a solid shot that the Minnesota-based company could see additional wind at its back. Think about all of the markets where there's overlap between the 2 rival stores. Whither the techies and those who like to peruse the latest and greatest in the world of gadgetry?
While Radio Shack (RSH) could draw some traffic from the senior crowd (e.g. my dad and his friends - no offense, Pop), my hunch is that Best Buy will reap the biggest rewards, particularly come holiday time. I sense that analysts who follow this space may be more apt to promote the chain, given the void left by Circuit City’s demise.
Don’t forget - as I mentioned above, Best Buy has some price momentum in its favor. Wouldn’t you think money managers looking to dress up their portfolios with “winners” come quarter end might be eager to add the shares into the mix? It’d sure cross my mind.
Two more things:
First, the valuation. At present, the company trades at about 12.3 times next year’s estimate of $2.38. Not bad given that the company is expected to grow at a more than 12% clip per annum in the next 5 years.
Second, check out the insider data. There was a flurry of purchases toward the latter part of last year - mostly at prices lower than the current market price. Still, it’s nice to know that execs have been willing to belly up to the bar even during these otherwise tough times.
Best Buy? You bet it is!
Hey, have a great day!
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