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Six Reasons Best Buy Is a Retail Winner

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Company offers good reasons to check it out before earnings announcement.

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On September 15, electronics retailer Best Buy (BBY) is due out with its second-quarter numbers. And I'm here to tell you I think the shares are worth a look ahead of the announcement.

Here's why:

1. Although the shares have certainly had a nice run since the latter part of 2008, the stock hasn't gone straight up like some other big names out there. In fact, it seems to be hovering roughly in the $30 to $40 range, looking for some sort of catalyst. Because of this, I'm less worried about profit-taking.

2. It's thumped the estimate the last three quarters, and I think it will beat again. Management knows this game, and it will be doing its utmost to make sure investors are left with a good taste in their mouths, post release. Incidentally, note that in the last 30 days, the estimate has edged up from $0.40 to $0.41. Not gigantic by any stretch, but still a good thing.

3. The holidays are nearing. And while I don't think the average person is going to be spending their money on larger-ticket items like cars, vacations, or high-end jewelry, I do think they'll spend it on simpler things for themselves and their family. Many will likely use the holiday season as a reason to replace that old refrigerator or get a new digital camera -- in other words, money will be spent on lower-priced items, which Best Buy carries.

4. Target (TGT) and certainly Arkansas-based Wal-Mart (WMT) are likely to be big thorns in the company's side in the very near-term. But Best Buy's selection, big-store base, prices, consistent advertising, and helpful salespeople will continue to lure people in the door. I don't think Target, Wal-Mart, or Radio Shack (RSH) for that matter, will be able to establish too serious a challenge any time soon.

5. It's still got a bit to go, but if it can make a new high, it could get a lot of attention.

6. As I'm writing this, the stock is trading right about where a director bought 1,900 shares in April. That's no guarantee of success, but it does put me more at ease knowing I could hypothetically belly up at about the same price.

If you can't tell, I'm pretty sweet on the stock. I think it could go to the mid $50 range if it hits/looks likely to hit the $3.10 estimate for next year.
No positions in stocks mentioned.

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