« S&P 500 New Bull Market High | Main | Sector Relative Strength: Industrials Improve, Utilities Dive »
Tuesday
Aug212012

Best Buy's Bad Buys

Shares of Best Buy (BBY) are trading down 10% this morning after the company reported weaker than expected earnings and suspending guidance.  In spite of the poor operating performance, the company must have had some confidence since they managed to spend $112 million buying back 6.3 million shares of stock.  That confidence appears to have evaporated now, though, as the company also announced that it will suspend all future share repurchases indefinitely.

Looking back at BBY's history of repurchases since the start of 2010 shows that the company has not been a very good judge of its stock price.  The chart below shows the historical price performance of BBY going back to 2010, with each red dot representing quarters where the company repurchased shares.  Since the start of 2010, BBY has spent $2.9 billion buying back stock on the open market at an overall average price of just under $30 per share.  Put another way, with a current market cap of $5.6 billion, BBY has spent more than half of its current market cap since 2010 buying back stock.  Over that same period, the stock has dropped close to 60%!

Become a Bespoke subscriber today to access Bespoke's Model Stock Portfolio -- beating the S&P 500 by 27 percentage points since inception in May 2007.