The Big Box Trend Remains Alive and Well

For years, analysts bemoaned the “death of retail.” But consumers remain king, and many still want to shop in person, or online at a store other than Amazon (AMZN).

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  • That’s been a boon largely for the big box stores, which offer convenience, low prices, and a wide selection of offerings. And as earnings season has shown, these stores are still growing while also trading at a reasonable value.

    Case in point? Best Buy (BBY). The electronics retailer was seen as a particularly weak competitor in the online age. But shoppers still want to look over products like appliances and computers before making an expensive decision, and the company has been astute at increasing its online sales as well.

    The firm has even boosted sales thanks to curbside pickup, or appointments to go inside stores to keep crowds down. Shares handily beat earnings expectations as well as same-store sales comps in the most recent quarter.

    Action to take: Shares are priced at 15 times forward earnings, which continue to grow rapidly. The company just boosted its dividend, so today’s investors can get about a 2.5 percent starting yield likely to grow over time.

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  • For traders, the company’s big pop after beating earnings has still left it under its 52-week highs, but likely capable of moving back. A trade like the January $125 calls, last going for about $8.40, can leverage that move into mid-to-high double-digit returns in just a few months.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.