Tuesday, March 17, 2009

BBY: This run up is silly

The speculation is absolutely silly and these momentary good times
will soon burst like every other bubble. Seriously, a 8% gain in one
day? I gotta ask the question that everyone is asking: Really?

Think about it, there is a reason why Circuit City failed, they barely
had any traffic. It's absurd that Best Buy is rising because it's
getting 50% of Circuit City's non-traffic. Also to think Best Buy was
the reason why Circuit City went under is silly. The real reason is
the emergence of Amazon and Walmart in this consumer electronics

Let's also factor in the bigger picture. This is a bear market rally.
There are no fundamentals supporting this run up. Unemployment is
still rising. Companies are still laying off people. The government
can only do so much to stimulate the economy. It helps, but time is
really the only cure.

On top of that, consumers that are buying are looking for bargains and
those are not to be found at Best Buy. Best Buy may have lost a weak
competitor in Circuit City but now it has two real rivals in Amazon
and Walmart who sell 10-20% below whatever Best Buy can ever offer.

So here's another concept for you. Best Buy's competition is not just only consumer electronics stores. I'll give you a couple more. Apple iTunes and Netflix. People buy DVDs when it's a luxury however there is a reason why Netflix is doing so well right now. People are renting instead of buying. Also, those who say people still buy CD's like they used to is just silly. So if people aren't buying DVDs or CDs, and if that's the number one source of traffic to Best Buy... well, you know where I'm getting at.

Look, I'm not saying Best Buy is going away. It's not. I think in different times where people have more expendable income, I think Best Buy will do ok. But those times aren't now and we as investors need to see the other side rather than what the analysts feed us everyday. Let's not be sheep. To say Best Buy has no competition now is such sheer hubris.