Well, we slithered our way out of Best Buy at the right time. We have all heard the slogan, "buy the rumor, and sell the news". I don't believe in waiting for the news.
BBY announced this morning that 都ales of electronics and appliances were offset by higher costs for new-store openings, labor costs and an expansion of services, shaving nearly a point from operating income as a percentage of revenue".
I don't think that is the whole story however. Analysts were looking for income of $152.13 million, or 30 cents a share, on sales of $7.34 billion. Same-store sales were projected to rise 4%, but actually came in at 3.3%.
Like many Americans, BBY bit off more than they could chew by spending too much money, while at the same time, cutting prices. I told you that price cuts at most retailers would eventually flow through to the bottom-line.
Conveniently, analysts are now beginning to come out and downgrade the stock.
Wal-Mart (WMT): The company started early on the price cut craze by squeezing its suppliers. The company痴 main focus has been sales in rural markets, and capturing market share at the expense of other retailers.
Wal-Mart痴 都uper center� focus has been creating a backlash across the nation. In the years ahead, as smaller retailers continue to fail, the company will begin to feel pressure from politicians, nationally as well as locally.
All in all, I feel the upside in the stock is limited over the next 18 months, and we are looking to be sellers of the stock above $50.
Retailers: We obviously missed the best shorting opportunity among the retailers. The ML Retail Holders (RTH) hit over $100/ share on November 21st. We may get close to that price again in the weeks ahead, and I would like to initiate a short position above $100.
Google (GOOG): Jim Cramer is pumping Google shares again. GOOG is clearly a momentum stock right now. When the tied eventually turns, it will be "bombs away" in the stock. Unfortuately, I don't know when the craze will end. It may end now, or 100 points higher.
Comments (2)
Congratulations John on your call on Best Buy. You nailed it.
Posted by alan | December 13, 2005 10:45 AM
Posted on December 13, 2005 10:45
John....I am not an apologist for WalMarts, but I couldn't disagree with your comment more about politicians putting pressure on WalMart in the future. You have been reading too much of the liberal press. Think about it, can you see Ted Kennedy blasting WalMart? I don't think so. Kennedy has a constituency of poorer families and seniors on fixed income who frequent WalMarts, not for political reasons, but because they can purchase stuff there cheaper. An example is Vermont, which severely restricts WalMart. However, the Vermonters living close to New York fill the WalMart parking lot on the weekend. The parking lot is literally filled with green license (Vermont) plates. WalMart may go the way of Woolworths, W.T. Grant and Montgomery Ward, but it will be because they mis-manage their business, not because of what the politicians do.
Posted by davpac | December 14, 2005 6:22 AM
Posted on December 14, 2005 06:22