Best Buy Company Inc (BBY)

This business is definitely under pressure. Like a lot of the big box format stores, they expanded and expanded and got into different areas of the market and became over saturated. The former chairman of the board is now back and things have improved. However, at the end of the day, the longer-term thesis is that the store format is to get much, much smaller and it has to address how the online retail businesses are essentially stealing their business. Thinks earnings power is lower over the medium term.

Chart shows a long downward trend line from the beginning of 2011 until the end of 2012. It then broke the trend line, which is a good time to be stepping in. It broke that in its seasonally strong period which means it is actually a good position to be in. Chart shows it is coming up to some resistance at about $20 and may have difficulty getting past that. If it does, then you hang on until once again it breaks the trend line and starts coming down.

Doesn’t like the business model. The reality is that one of Amazon’s fastest-growing areas is consumer electronics. They can sell these same goods cheaper and make more money than the box stores can.

There are a couple of different dynamics on this. Fundamentals on electronic retailing have not been good for a while because of the advent of online shopping. Also, the founder has been talking off and on of buying back the company. More of a gamble than an investment.

The fundamentals keep changing and there is no new product out there, deciding earnings, down next year. Likes to see the growth in earnings. They are still profitable but there are better places long-term to put your money.

Has a massive presence online. Probably trading at 4 or 5 times earnings compared to Amazon at about 100 times. Thinks people are overly pessimistic about this company. No question their business is in decline but maybe they’ll turn it around.

The problem that this and all the other big box stores have is that their lunch is being eaten by Amazon (AMZN-Q). The question is, if you are a Best Buy or Future Shop, how can you compete with online services that have no bricks and mortar, salesmen, maintenance, etc.?

Has a very distinct downward trend and, as yet, has not indicated when this stock is going to bottom. Have had some financial difficulties. Changed their senior management a couple of times. Losing market share to Amazon (AMZN-Q) and the Internet providers.