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Time To Start Looking At Best Buy

June 29, 2010 | About:
It's been a while since Best Buy (BBY) has appeared on the magic formula screen. I believe the last time the company appeared on the screen its main competitor(s) Circuit City and CompUSA were still in business. Prior to their bankruptcies, Best Buy (BBY) had better margins and efficiency ratios than its competitors. It did this by using effective marketing and having a better distribution system than its competitors. Soon after, the economy and consumer spending turned sour and it changed the electronics industry. The good news is that the decrease in consumer spending along with a credit crisis led to Circuit City and CompUSA to shut its doors. This led a portion of the electronics industry up for grabs and new competition emerged. Unfortunately for Best BUy, that competition came from mass merchants like Wal-Mart and warehouse clubs like Costco, both which are well run and can offer greater discounts due to their size. Nevertheless, despite its recent struggles , Best Buy continues to post consistent numbers which at least merits consideration for purchase.

Magic Formula Numbers

Earnings Yield

With operating income of 2.235 billion and an enterprise value of 13.088 billion, Best Buy currently has an attractive earnings yield of 17.07%

Return On Capital

With operating income of 2.235 billion and capital of 5.658, Best Buy currently has Return On Capital of about 40%, which usually indicates the firm has some sort of moat.

Best Buy operates in a single business segment, selling personal computers and other home office products, consumer electronics, entertainment software, major appliances and related accessories principally through its retail stores. Best Buy Co. Inc. has a market cap of $14.41 billion; its shares were traded at around $34.16 with a P/E ratio of 11.1 and P/S ratio of 0.3. The dividend yield of Best Buy Co. Inc. stocks is 1.7%. Best Buy Co. Inc. had an annual average earning growth of 16.6% over the past 10 years. GuruFocus rated Best Buy Co. Inc. the business predictability rank of 5-star.

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Gurus' Positions with BBY

Best Buy Co. Inc. is owned by 8 Gurus. 1 Guru Initiated Positions in BBY: Richard Snow bought 30,300 shares in the quarter that ended on 03/31/2010, which is 0.05% of the $2.67 billion portfolio of Snow Capital Management, L.P.. 2 Gurus Increased Positions in BBY: David Dreman owns 84,511 shares as of 03/31/2010, an increase of 120.87% from the previous quarter. This position accounts for 0.08% of the $4.24 billion portfolio of Dreman Value Management. Mark Hillman owns 49,947 shares as of 03/31/2010, an increase of 26.63% from the previous quarter. This position accounts for 0.4% of the $538 million portfolio of Hillman Capital Management.

4 Gurus Kept Positions in BBY Unchanged or Slightly Adjusted: George Soros owns 3,369,000 shares as of 03/31/2010, which accounts for 2.13% of the $6.73 billion portfolio of Soros Fund Management LLC. PRIMECAP Management owns 4,138,700 shares as of 03/31/2010, which accounts for 0.28% of the $63.66 billion portfolio of PRIMECAP Management. Bill Nygren owns 1,760,000 shares as of 03/31/2010, which accounts for 2.25% of the $3.32 billion portfolio of Oak Mark Fund. Arnold Schneider owns 124,885 shares as of 03/31/2010, which accounts for 0.32% of the $1.67 billion portfolio of Schneider Capital Management.

1 Guru Reduced Positions in BBY: John Hussman owns 1,000,000 shares as of 03/31/2010, a decrease of 73.33% of from the previous quarter. This position accounts for 0.75% of the $5.67 billion portfolio of Hussman Economtrics Advisors, Inc.. 2 Gurus Sold Out BBY: Richard Aster Jr sold out his holdings in the quarter that ended on 03/31/2010. Ken Heebner sold out his holdings in the quarter that ended on 03/31/2010.

CEO Recent Trades:

  • Sell: CEO Brian J Dunn sold 13,848 shares of BBY stock on 04/01/2010 at the average price of 42.73. Brian J Dunn owns at least 38,523 shares after this. The price of the stock has decreased by 20.06% since.

Directors and Officers Recent Trades:

  • Buy: Director Lisa Caputo bought 222 shares of BBY stock on 06/01/2010 at the average price of 41.99. Lisa Caputo owns at least 222 shares after this. The price of the stock has decreased by 18.65% since.
  • Buy: Director Khosla Sanjay bought 1,000 shares of BBY stock on 05/19/2010 at the average price of 42. Khosla Sanjay owns at least 2,000 shares after this. The price of the stock has decreased by 18.67% since.
  • Buy: Director Rogelio Rebolledo bought 1,000 shares of BBY stock on 04/30/2010 at the average price of 46.85. Rogelio Rebolledo owns at least 1,850 shares after this. The price of the stock has decreased by 27.09% since.
  • Buy: Director Gerard R Vittecoq bought 514 shares of BBY stock on 02/25/2010 at the average price of 36.43. Gerard R Vittecoq owns at least 3,432 shares after this. The price of the stock has decreased by 6.23% since.
  • Buy: Director Gerard R Vittecoq bought 499 shares of BBY stock on 01/25/2010 at the average price of 37.51. Gerard R Vittecoq owns at least 2,918 shares after this. The price of the stock has decreased by 8.93% since.
Disclosure: None

About the author:

Alex Garcia
Alejandro Garcia, B.S. Business Admin-Option in Finance, is a private value investor who uses his blog as a means to write about his experience with Joel Greenblatt's Magic Formula

Visit Alex Garcia's Website


Rating: 3.7/5 (6 votes)

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