Friday, September 23, 2005

UBS Upgrades Best Buy: Follow Up

This contrarian thing really seems to be working for us.

We hit the nail on the head with Best Buy, whose shares we recommended after the company lowered guidance and then again when BBY missed earnings.

Even after Circuit City reported its blow out quarter just the other day, we stuck to our guns.

In case you missed the 9/14 upgrade, we wrote:

Best Buy (BBY) was crushed on Tuesday after management lowered guidance and talk continued about higher gas price's effect on discretionary consumer spendng.

What that means for the "value "investor is that Best Buy is now at an attractive buying level.

How do you determine if a stock is getting unnecessarily clobbered?

Ask yourself this: Is the stock price deterioating much faster than the business (model) underneath it?

Sure, Best Buy the stock gets hammered but Best Buy the enterprise remains a market leader.

We heard the conference call (twice) and we think management has its game together.

We'll take Best Buy over Walmart or Circuit City any day of the week.

BBY is 10 points off its 52 week high and we feel a regression to the mean is in order for the consumer retailer.

We're issuing a short term Strong Buy Rating on Best Buy shares.

The middle class is finally beginning to feel the pain at the pump, but at the end of the day, mom still needs her camera phone and junior his iPod nano.

Bottom line: Don't let the talking heads on CNBC with their "retail stinks" spiel lose you money.

If you deconstructed the conference call - as we did - you would've recognized that BBY is recovering from short term profit losses stemming from outlet overhauls.

We remain bullish on BBY.

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