|New Threads Only:|
|New Threads & Replies:|
Forum List » Value Ideas and Strategies|
Share and discuss value investing ideas and investing strategies.
David Einhorn on Best Buy (BBY)
Posted by: GuruFocus (IP Logged)
Date: July 24, 2012 10:10PM
Best Buy (BBY) was particularly irksome. We thought that the core debate was whether or not the company could compete with Amazon. The answer at this point is that maybe it can and maybe it can't. (Despite the consensus view, our store surveys have repeatedly shown that there is no price benefit for consumers to browse at BBY and then purchase at Amazon.) There has been some deterioration in BBY's domestic performance, which we attribute to a lack of a "must have" consumer electronics product, rather than an erosion of BBY's competitive position. While we held the shares, three unexpected problems emerged: First, BBY depleted $1.3 billion of its cash resources by paying a double-digit multiple for Carphone Warehouse's share of the Best Buy Mobile profit stream. The market promptly revalued those earnings to BBY's mid-single digit multiple. Second, in the most recent quarter, BBY's international profits collapsed. In particular, comparable sales in its Chinese business fell 28% as the Chinese economy appears to have hit a wall. Finally, the company dismissed its CEO over his personal conduct, and also removed the Chairman for failing to respond properly to the CEO's misbehavior. As a result, the company has an interim CEO and is trying to come up with a strategy. We worried that this could lead to additional business disruption so we exited with a loss.
Guru Discussed: David Einhorn: Current Portfolio, Stock Picks
Stocks Discussed: BBY,
Disclaimers: GuruFocus.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on GuruFocus.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The gurus may buy and sell securities before and after any particular article and report and information herein is published, with respect to the securities discussed in any article and report posted herein. In no event shall GuruFocus.com be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on GuruFocus.com, or relating to the use of, or inability to use, GuruFocus.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. The gurus listed in this website are not affiliated with GuruFocus.com, LLC. Stock quotes provided by InterActive Data. Fundamental company data provided by Morningstar, updated daily.