Fish swims against Best Buy tide

Rob St George 19 Mar 2013 | News - Comment now

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Fish swims against Best Buy tide

Best Buy has started the year brightly, after a torrid 2012

The manager of the JPMorgan American Investment Trust has labelled criticism of the US electronics retailer Best Buy (NYSE:BBY) ‘overhyped’.

Shares in Best Buy plunged by 49 per cent through 2012; this month the firm disclosed an 80 per cent collapse in its operating income for the year to 2 February 2013.

Garrett Fish, the fund’s manager, further noted that the company ‘not only suspended its current forecast but said that it would not provide a new outlook’.

However, since the turn of the year has rallied, its stock gaining an impressive 87 per cent.

This rise was in part attributable to expectations of a takeover by Best Buy’s former chairman, Richard Schulze, but the deal foundered earlier this month after Schulze failed to secure the required funds.

Fish has nonetheless remained confident about Best Buy’s prospects. ‘We continue to believe that the structural issues are overhyped,’ he explained, and added that ‘product cycle weakness’ – meaning a lull in the release of new gadgets – was ‘the primary culprit of this ongoing concern’.

The manager also pointed to what he characterised as a ‘modestly favourable environment’ for US equities in general, as the Federal Reserve keeps monetary policy loose and encouraging signals are received from the housing sector.

‘It would be a welcome relief for markets to focus on the robust fundamentals of corporate America and not on the growing fiscal problems of the US government,’ Fish concluded.

Related topics: US equities

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