The past few weeks have shown that inflation still remains a problem, and that consumers may be close to tapping out. That’s slowed down the move higher in retail stocks, many of which had started moving higher in the autumn ahead of the holiday season.
However, the market selloff over the past year has already created a number of values. With fear dominating some sectors today, buying industry leaders may prove ideal for finding market-beating returns in the months and years ahead.
For instance, electronics retailer Best Buy (BBY) just received a downgrade ahead of its next earnings report.
That’s too little, too late for the company, which already saw earnings slide 44 percent over the past year. However, shares have already reached value territory, with the stock trading for 0.4 times its price to sales ratio, and about 12 times its price to earnings ratio.
If Best Buy simply maintains its sales from here, it should fare well. When earnings improve, shares should be able to move far higher thanks to today’s lower valuation.
Action to take: Investors may like shares here, as Best Buy now yields about 4.2 percent at current prices. That will pay investors well to wait for a rebound in shares.
For traders, the June $90 calls, last going for about $3.75, offer mid-double-digit returns on a continued long-term trend higher in shares over the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.