With the announcement of the U.S. government seizing control of mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE) the housing crisis that has gripped the nation for the past two years appears to be nearing its zenith. While the full impact of the move is hard to immediately gauge, the injection of $100 billion into each of the companies could help lower mortgage rates and help give banks more confidence in refinancing existing mortgages at lower rates to help some troubled homeowners.
What it all means is more money in consumer’s wallets, and that means more spending and more money in store cash-registers. Think of the rescue as a massive economic stimulus package for consumers.
Enter the Best Buy Co., Inc. (BBY) which I figure will be one of the first recipients of the extra cash in people’s wallets. Best Buy stores are quite simply the “go to” place to spend our extra money on the gadgets we all want, can’t do without, and try to impress our friends with (see also, “Nokia’s (NOK) Price War“).
In addition, the company also sells appliances through its Pacific Sales Kitchen and Bath Centers, Jiangsu Five Star Appliance Co.; as well as provide technical services for home and office computer users through it’s Geek Squad.
Best Buy is also rolling out kiosks which can be found in major airports to serve travelers looking to find a lost, broken or forgotten product. Despite the economic slowdown, BBY is positioning for future growth.
Best Buy Stores: Big Plans to Double
Earlier this summer, Best Buy announced plans to double its sales, to $80 billion over the next five years. Though it was short on specifics BBY did say that the California-based Pacific Sales Kitchen and Bath Centers chain may be rolled out on a national level.
Other sales gains will come in the form of… >international expansion, planned new product categories and grabbing market share from competitors. To that end, BBY now sells Apple’s iPhone – the only other non-Apple and AT&T retailer to do so (see also, “Apple Ups the Ante With 3G iPhone“).
Best Buy is doing the right thing by expanding and creating alliances during this economic downturn. For example the company’s venture with The Carphone Warehouse, Europe’s largest independent retailer of mobile phones and related services with 2,400 stores across nine countries, is paying big dividends.
Consumer electronics has been the fastest growing category of retail over the past five years in Europe, and the two companies see the trend continuing, particularly in computing, entertainment and communications.
Monday’s Fannie Mae and Freddie Mac inspired rally produced healthy gains across the retail and other consumer discretionary sectors (see “Fannie-Freddie Bailout: What It Means to You“). While consumers are not out of the woods just yet, I believe the bottom was put in earlier this summer.
BBY, the 800 pound gorilla of its sector, stands to prosper once the economy enters rebound mode. Shares trade hands at just 13 times forward earnings estimates and 45 percent of sales.
With such a low valuation I’d say take advantage of this opportunity before it is too late!
Is it too late for BBY? Louis Navellier doesn’t think so. BBY rates as a strong “B” for "Buy" in PortfolioGrader Pro, his very own online stock rating system. This amazing tool provides easy-to-interpret letter grade ratings for nearly 5,000 Wall Street stocks. Simply log on online and within seconds you’ll instantly find Navellier’s specific buy/sell/hold advice for nearly any stock! And best of all? It’s yours free when you accept a risk-free trial to Blue Chip Growth! Click here to learn more!
