Sold Best Buy

4 Sep 2013 by Jim Fickett.

I bought Best Buy at an average price of about $16/share (see Holding on to Best Buy), and sold this week at about $35/share. Greater-than-100% gain is a pretty good reward for simply ignoring widely repeated myths with no basis in fact.

It could be that the stock will rise significantly further. At today's closing price of $37 the market cap is $12.64 bn. One estimate of future sustainable free cash flow, based on a long-term average of (free cash flow)/revenue, is $1.07 bn, which gives a free cash flow yield of about 8% – still impressively high. But Best Buy is still a turnaround story – they built too many stores, let customer service lapse, and ignored the web. So although I think the stock is probably not a bad holding, the case is not as strong as it was, and I will happily take my profits.