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Best Buy Co., Inc. Message Board

  • profitgrowthfirst profitgrowthfirst Oct 25, 2012 10:17 AM Flag

    BBY is a Sucker's Value Trap

    It bothers me to no end to hear people say, "oh wow, the dividend is better with this new lower price", or "I have been wanting to buy, and now the shares are cheaper". That is how people fall into value traps and spend months, seasons, and years waiting for turnarounds that never happen.

    The people that bought HPQ at $30 or $32, because its price and dividend were much cheaper compared to when it was $42, and the people that bought RSH at $10 or $12 because the dividend was so much better than when it was $22 and the people that bought BBY at $25 or $30 because the price and dividend looked so much more attractive, did nothing more than cut their hands really bad trying to catch a falling knife. By the way, RSH's dividend is gone, and HPQ's and BBY's are following suit in the not-too-distant future.

    When earnings are collapsing, the stock price must collapse, too.

    If you like the idea of Schulze buying out the company, and you want to play for a buyout, look elsewhere. There are a lot of better companies that are takeover targets. Try TRLG. True Religion Jeans has put themselves up for sale, and unlike BBY, they are not pre-announcing disaster quarter-after-qaurter.

    Sentiment: Sell

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    • You're right. We've seen this movie before with Circuit City. I've contemplated the dividend play and the buyout play, but I just can't pull the trigger.

      Sentiment: Sell

      • 2 Replies to corporaterobot
      • Betting on a buyout is just too dangerous. Think about it critically: What private-equity firm is willing to buy a company that was valued at $12.8 Billion, and has watched its value fall to $6 Billion, and is now guiding profit down again, after they missed on earnings 5 of the last 6 quarters.

        If you were in charge of a PE firm, would you want to pay about $ 7 Billion or $8 Billion (or about $20-$22 per share), which is the lowest they could pay while giving the current shareholders any worthwhile value, when the company's value is crashing from $6 Billion to $5 Billion to below $5 Billion? That means, it will be difficult for Schulz to find a PE firm that is willing to put that kind of money down, which would be necessary to get a deal done.

        Sentiment: Sell

      • Thanks for the 'thumbs up'. Yes, Circuit City is a comparable example. I remember CC crashing and burning, all the while Management was talking about their new 'pricing strategy' and how they were going to 'make up for it with volume'. Then they claimed a 'good Christmas-shopping season' was going to turn the ship around. Finally, they resorted to talking about 'buyout potential' and the inherent value in the company. Anybody that bought all that garbage hook-line-and-sinker ended up losing their intire investment.

        Sentiment: Sell

 
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