BBY

Thinking Slow: 3 Research Blind Spots That Changed the Investment World

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Dear members: — Daniel Kahneman in his text Thinking, Fast and Slow (1) divided the human psyche into two systems. The first system is instinctive and emotional, often set on autopilot, while the second system is slower and more logical, requiring a calculating conscious. Many of the maxims the investment world takes for granted today suffer from conclusions that are made rapidly, almost without thinking, driven by our first system, creating what I call research blind spots. — In World War II, Allied bombing raids were suffering from very high casualty rates. It was estimated that for those pilots that were flying at the beginning of the war, only about 10% survived, a terrible loss rate. Bombing was crucial to the Allied … Read more

Best Buy Puts Up Best Comp Growth in Three Years

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Image Source: TradingView By Brian Nelson, CFA On August 28, Best Buy (BBY) reported better than expected second quarter results for fiscal 2026 with revenue and non-GAAP earnings per share coming in ahead of the consensus forecasts. Revenue grew to $9.44 billion from $9.29 billion in the year-ago period, with comparable store sales increasing 1.6%, lapping a 2.3% decline in last year’s quarter. Adjusted operating income margins fell 20 basis points to 3.9% from the same period a year ago, while adjusted diluted earnings per share came in at $1.28 versus $1.34 in last year’s quarter. Management had the following to say about the results: We delivered comparable sales growth of 1.6% in the second quarter, our highest growth in … Read more

3 Undervalued Stocks to Consider Buying Now

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Dear readers:   With the markets retracing most of their recent drawdown, we’re taking a victory lap as we didn’t panic, nor should have you. We highlighted our wait-and-see approach amidst the worst of the pullback, and we expect the Magnificent 7 (large cap growth and big cap tech) to continue to propel the markets higher, as they have done.   We’ve been busy rolling valuation models as we finetune our assumptions for a great number of companies under coverage. While doing so, we came across three undervalued stocks that are also included in the simulated newsletter portfolios. We think they’re prime for highlight.   The three stocks are UnitedHealth Group (UNH), Nvidia (NVDA) and Alphabet (GOOG). We spend a lot of time on discounted cash-flow valuation, … Read more

Magnificent 7 Earnings Reports Not Bad Thus Far

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By Brian Nelson, CFA   Shortly after Trump’s Liberation Day, where the President unveiled lofty tariffs on numerous countries, we released our wait-and-see outlook for the equity markets, which thus far has proven to be the right move, with the markets largely recovering from the depths reached in April. The S&P 500 (SPY), for example, is down just 3.3% year-to-date, excluding dividends.   A lot has happened since Liberation Day, including easing of tariffs to a 10% baseline for most, if not all, countries, with the key exception of China, where tariffs remain extremely elevated and prohibitive. Many countries are now reportedly negotiating trade agreements with the White House, and we expect China to be added to that list soon, even if … Read more

Trump Tariffs Higher than Expected; What We’re Doing

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By Brian Nelson, CFA The Trump tariff increases came in larger than what we were expecting, and it remains to be seen how they will flow through the global economy, as we monitor potential retaliatory tariffs from other countries. As it relates to the equity markets, we’re taking a wait and see approach at the moment as we monitor new policy changes related to trade, immigration, fiscal (tax), and regulations. In short, we’re not overreacting to the sell off as we won’t have a great handle on the tariff impact to companies for a few quarters when they report results post-tariff increases. That said, we’re expecting continued market volatility, with meaningful risk to the downside, before trade uncertainty alleviates in … Read more

Best Buy Reports Better Than Expected Q2 Results; Raises Bottom Line Outlook

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Image: Best Buy’s shares are bouncing back on an improved earnings outlook. By Brian Nelson, CFA On August 29, Best Buy (BBY) reported better than expected second quarter fiscal 2025 results, with revenue and non-GAAP earnings per share coming in higher than the consensus forecast. Though comparable store sales declined 2.3% in the quarter, management noted that it delivered better performance in its Domestic tablet and computing categories, which together posted comparable sales growth of 6% versus the same period a year ago. Non-GAAP earnings per share increased 10%, to $1.34, in the quarter. Management spoke to industry stabilization in the press release: As we look to the back half of the year, we expect our industry to continue to … Read more

Paper: Value and Momentum Within Stocks, Too

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Please select the image below to download, “Value and Momentum Within Stocks, Too:” Abstract: This paper strives to advance the field of finance in four ways: 1) it extends the theory of the “The Arithmetic of Active Management” to the investor level; 2) it addresses certain data problems of factor-based methods, namely with respect to value and book-to-market ratios, while introducing price-to-fair-value ratios in a factor-based approach; 3) it may lay the foundation for academic literature regarding the Valuentum, the value-timing, and ultra-momentum factors; and 4) it walks through the potential relative outperformance that may be harvested at the intersection of relevant, unique and compensated factors within individual stocks. To download the full report, please click here (pdf). ———- Actual results … Read more

In the News: CRM, FL, DG, BBY

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Image Source: Mike Mozart By Brian Nelson, CFA Salesforce Issues Weaker-Than-Expected Outlook On May 29, Salesforce (CRM) reported mixed first quarter results with revenue missing the consensus estimate, and it issued lackluster guidance that sent shares tumbling following the report. In the quarter, revenue advanced 11% in constant currency and its first-quarter non-GAAP operating margin came in at 32.1%. Its current remaining performance obligation was $26.4 billion, up 10% in constant currency. Operating cash flow and free cash flow were up nicely in the quarter, to the tune of 39% year-over-year and 43% year-over-year, respectively. However, the rosy cash-flow performance was overshadowed by the company’s second quarter sales outlook that came in lower than the consensus forecast. Even though Salesforce … Read more

Best Buy’s Free Cash Flow Comes Up Short in Covering Dividend

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Image Source: Mike Mozart By Brian Nelson, CFA Back in late February, Best Buy (BBY) reported better than expected fourth quarter fiscal 2024 results, despite revenue pressures. Enterprise comparable store sales fell 4.8%, but the drop was lower than what consensus had been expecting and represented a marked improvement over the same 13-week period last year. Though Best Buy is not immune to the challenges in retail these days, the company continues to hold its own, despite a heated competitive environment. Domestic revenue fell 0.9% due to a decline in comparable store sales, with management pointing to weakness in home theater, appliances, mobile phones and tablets, but strength in gaming-related revenue. Though revenue was under pressure in the period, the … Read more

We Remain Bullish; Is This 1995 – The Beginning of a Huge Stock Market Run?

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Image: Large cap growth stocks have trounced the performance of the S&P 500, REITs, and bonds since the beginning of 2023. We expect continued outperformance in this area of the market. By Brian Nelson, CFA We’re now roughly four years past the depths of the COVID-19 meltdown, where equities collapsed in February and March of 2020. As the markets began to recover through 2020, our long-term conviction in equities only grew stronger. We think the biggest risk for long-term investors remains staying out of the market on the basis of what could be considered stretched valuation multiples. As we outlined heavily in the book Value Trap, valuation multiples hardly tell the complete story about a company and often omit key … Read more