I stated last Tuesday that shares of Best Buy (BBY) would look attractive to me at $33. Well, the stock has recently dropped to the $33 level and has entered the buy zone.
The Buy Is Best Buy
Best Buy is currently trading at 10 times this year’s earnings and 9 times next year’s earnings. The stock is down a whopping 25% over the past month alone. The drop has been due to the recent earnings miss and lower foot traffic in its stores.
I cannot say that shares have totally bottomed up but an investor could feel comfortable taking a 25% to 30% position in the stock. That means but 1/4 to 1/3 of the total position that you are planning on buying.
The Sell Is Netflix
This may be sacrilege to some people as Netflix (NFLX) is the darling of analysts, traders, and growth investors. Everyone loves the growth potential of the online movie company with the limitless future. I have been wrong on Netflix in the past and may be wrong again but I am not buying it.
I know that Netflix is a great company and has eaten Blockbuster for lunch but Netflix’s valuation is not sustainable. Netlfix trades at 60 times this year’s earnings and 50 times next year’s earnings. This is a stock that is priced for perfection.
I think that Netflix investors will be in for a shock if the company’s subscriber growth or Wall Street revenue projections fall short. Investors would be wise to start trimming their position or buy some protection in case Wall Street’s darling tumbles.
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