Smart Investor, You might be asking the wrong person about fundamentals because I trade mostly on technicals. If I was a long term holder of BBY, or any other stock for that matter, the fundamentals would be more important to me. But, I do look at the fundamentals because I like to become familar with the quality of a company before I will buy it. If the fundamentals look like garbage, I am much less likely to buy a stock--good technicals or not.
Now, back to your question. I think a long term holder of BBY should be concerned about the high debt. The company operates in a low margin, perfectly competitive (almost), commodity business. Only the strongest will survive, and BBY's high debt will make it hard for them to compete. Banks may eventually quit lending them money and if they aren't generating enough cash internally, they may have trouble meeting operating expenses or continuing their expansion plans. I have already noticed that they cut down on advertising in the Sunday newspaper. Maybe they are just saving money for the Christmas rush, but a lack of cash could also be the culprit. Also keep in mind that BBY has a preferred stock issue, the dividends of which are added to their debt service. But one can make money from the long side in a stock like BBY. You just have to pick your entry point carefully, hope that the technical analysis works, and not get too attached to the stock.
Dan |
