| As the holiday shopping season is days upon us, | | | | going to be granted employment which will result |
| investors are trying to locate the perfect gift for | | | | in a higher overall domestic income for America. |
| themselves in the form of rewarding shares. With | | | | Since most Americans utilize a process of a |
| the launch of the next generation of video games | | | | negative savings rate, there is a good chance, |
| upon us as well as the continued advancements in | | | | relative to most years, consumption of luxury |
| technology for the consumer, there may be no | | | | goods such as video games or computers will |
| better stock to invest some capital in than Best | | | | increase in large margins especially during this |
| Buy (BBY). However as the economy is not in a | | | | holiday season. What that means is that margins |
| stable position, and could be turning for the worst | | | | will dramatically increase in the short run for the |
| in terms of growth, how long should you hold on | | | | next few quarters, and if you are to buy shares |
| to this near perfect equity? | | | | of this stock now and sell it before the March |
| To first bring in the fundamentals, Best Buy really | | | | earning results poor in, you should see a healthy |
| uses its name with conviction not only for its | | | | profit in your portfolio. This is especially true with |
| products but for its shares as well. Supporting | | | | the video game launches of Wii and PS3 which |
| tremendous growth percentage wise in terms of | | | | should have a tremendous impact as the |
| margins relative to revenue and operating income, | | | | Gamecube and Xbox did five years ago sprouting |
| while much can be attributed to strong economic | | | | the share price of Best Buy 250% in less than a |
| growth, such deduction does not deviate from | | | | year. However, as such an favorable economic |
| the fact that Best Buy is an excellently managed | | | | foundation remains strong now, because there is |
| and run company. Producing more total assets | | | | still slowing down in many parts of the overall |
| than liabilities year over year, Best Buy, with a P | | | | economy, such growth should not sustain all of |
| E ratio of near 22, is impressive compared to | | | | next year, and it would not be wise to hold on to |
| rivals such as Circuit City who's own P/E is | | | | this company if a strong recession hits. |
| hovering near 26. Granted, the difference may be | | | | Nevertheless, if you feel the urge to keep your |
| marginal and there is a good chance that Circuit | | | | shares, Best Buy, besides one instance (which |
| City will produce figures similar to Best Buy, the | | | | was the result of a split), has done fairly well |
| real comparison is that over the last six months, | | | | during times of economic slowdown. So while I |
| Best Buy has increased about 20% higher in | | | | wouldn't advise it, if you must, holding on to your |
| terms of share price, sustaining a lower P/E ratio | | | | shares as a long term investment would not be |
| while Circuit City has been floating around 17 | | | | that terrible to forgone profits. |
| trying to keep even. While such a short term | | | | Thus with the holiday shopping season |
| analysis may not provide the best scrutiny, as | | | | approaching rapidly, as an investor, the best buy |
| over the last five years both companies have | | | | of the season would be Best Buy shares. With a |
| done fairly well in terms of making investors | | | | fantastic fundamentals, a fairly stronger presence |
| happy, I feel that Best Buy with the strong P/E | | | | over its competitors, and a currently favorable |
| and stronger fundamentals should produce happier | | | | economic situation to feed upon, I would not be |
| investors relative to its rival. | | | | hesitant to take a short term risk in locating |
| Now, you may be wondering why I expect Best | | | | some luck with Best Buy. However, as the |
| Buy to produce incredible holiday season sales. As | | | | economy is always rapidly changing, and as the |
| recently reported, the unemployment rate, | | | | happy Christmas season turns into a dreaded long |
| currently at 4.4%, remains at one of the lowest | | | | winter, I would start to be a bit wary about |
| levels of all time. What that means for | | | | owning shares of this company past the spring |
| shareholders of Best Buy can be examined by | | | | months of 2007, especially if the recession turns |
| the consumers who are obtaining these jobs. As | | | | to be a hard landing. |
| the labor force increases, more consumers are | | | | |