Your Best Bet is "Best Buy"

I read a pretty interesting article on one of my favorite retailers, Best Buy (BBY). Morningstar is an industry leading financial analysis firm and recently included BBY in an article called “The Market’s Got It Wrong On These 5 Stocks”. I want to bring BBY to the attention of all the Urbanomics followers out there.

People often ask me, “What’s Your Strategy?”. And often I can’t give them a polished and insightful Wall Street response. My strategy is quite simply to follow in the mantra of Rick Ross, “Hustlin’”. Everyday I am hustlin’…hustle smarter and in some cases harder. So I keep my ears to the Street…literally and look for themes that I often agree with. I don’t recreate the wheel, I pay homage to those who have come before me and use the tools they put in place to learn how to ball out of control. I will admit that the stocks I have normally gravitated towards are deeply undervalued stocks that will benefit from the momentum of the market to catapult them to the returns that I am looking for. I know, I know…I am new school too and too much yapping and not enough proof is what we all want. Let look at a few of my purchases in the last few years, which have been consistent with this theme:

I am including a link to the Morningstar article so that you can read one of their writer’s views on why the street has this stock wrong. I agree with most points raised in this article. Best Buy has some of the key things I look for when I follow Warren Buffet, Peter Lynch, and the Urbanomic strategy.

Buffet Likes Because: This is a best in class stock that is undervalued. The stock has been beaten down and thanks to a poor earnings release, hammered even more (I know, I’m getting excited). This creates a good entry point near the 52 week low and what I think is some margin of safety (I’d rather by BBY on the way down then when they are up).

Lynch Would Be Proud Because: You buy stocks that you know and are familiar their product or business. I practically know where everything is in a BBY store.

Urbanomics Is Hustlin’ Because: Buffet and Lynch like a number of things about this stock. Urbanomics also like the fact that this stock is beaten down (like they stole somethin’), best in class, and there is a catalyst. BBY is raising its dividend payout and implementing a share buyback. Finally, we get a chance to buy this stock ahead of the winter season. And we all know retailers, will be cashing in during the holidays and earnings will see a much brighter day.

Morningstar article:
http://news.morningstar.com/articlenet/article.aspx?id=197250&pgid=wwhome1a

Mama Africa - Sweet Sierra Leone

The beautiful continent of Africa goes by many names. In keeping with my hip hop roots I had to pick the title of an Akon song made about his roots to West Africa. Akon is from "Senegal" to be specific, and if you haven't heard Mama Africa you should check it out. I have a very special connection with Mama Africa, West Africa, and Sierra Leone in particular. This connection led me to complete a personal dream of mine and that was to travel to Africa. I was able to make my trip to Africa earlier this year. The most common statements that I heard before/during/after my trip was people telling me that they have never met anyone that has actually gone to Africa. So obviously, everyone wanted me to give them an account of everything I did.


My one plea here on Urbanomics is that people take time to open a book and learn about different cultures. I heard so many strange comments about Africa before I left for my trip that often I found it hard to even respond to some of the those comments. Note to readers, everything you see on television...especially the Discovery Channel doesn't reflect life in every city or country in S. America, Africa, Asia, or even Europe for that matter. So here is my quick version of Urbanomics mythbusters:
1. People in Africa wear clothes
2. Not every person in Africa lives in a hut
3. Animals are not running loose everywhere
4. I am more afraid walking in Chicago, NY, or LA than I was in Sierra Leone
5. You won't go hungry from lack of food and water

My experience in Africa was so fulfilling that literally all you could do was soak up the entire experience. All my senses were on alert, and the heat I encountered coming off the plane was the first thing I noticed. My eyes immediately followed the Coca-Cola sign that welcomed all visitors to Sierra Leone. Then the sounds of people soon followed. People were speaking Krio, and for first time a sense of familiarity swept over me. A language that I had grown up listening to as a child was being spoken rapidly throughout the airport (yes, they have an airport!). Then the wave of emotions as strangers rush up to me, hugging me and repeatedly calling my name. Yes, strangers to me, but people that could pick me out of a lineup because they have followed my growth from a baby to a boy to a man through pictures and letters. Those persons where no strangers they were family and then it all made sense. All those heightened emotions soon relaxed and everything was calm. Calm, you're thinking yeah right in the midst of all that chaos. But seriously, I felt very calm throughout my entire trip because I had this overwhelming feeling finally being home...comfortable, surrounded by family, and by the love from my family, from strangers, and from Sierra Leone.

I could go on for days about how I ate mango, pineapple, fresh fish, and rice. I drank the local beer Star beer and rekindled my love soda out of the bottle especially orange (don't you want to Fanta). Then there was the beach, and the market where you buys cultural gifts, and I can't forget the trip to the countryside. A trip that took me away from the hustle and bustle of the city and reminded me of the simple necessities one needs from life.
If you've had any interesting trips abroad, I would love to know if you had a similar experience. Here are a few pics from my trip:

Reader Response – Qualcomm, Apple, AT&T

Thank you reader for holdin’ the West Coast down and keeping up with my blog and some of the big names in the stock game. Here is my response to your comment from the June 1 Stocks and Locks post:

Qualcomm – Being that my strategy normally addresses momentum plays QCOM has definitely been on my radar. But trying to catch QCOM is like a magician trying to catch falling knives…it might look like magic until you need surgery. QCOM recently got pimp slapped by the US International Trade Commission, who voted to partially ban phones imported to the US with chips involving an ongoing dispute with Broadcom. So sorry to break the news but:
1. ITC ban will affect QCOM’s bottom line
2. Any possible licensing agreements cripple QCOM business (kinda like Snoop’s character in Training Day)
These two things indicate this is a poor momentum play in the near term. The only positive thing that QCOM has on its side, is that so many US wireless carriers use phones with QCOM chips in it. They will lobby on behalf of QCOM to remove the ban. So unless you’ve got some friends at the ITC I would stay away from this stock until more news is released. The good short term momentum play here is Broadcom (BRCM). Broadcom stands to gain the most through an outright ban or some possible settlement or licensing agreement. And I will give you one more Urbanomic head’s up…check out the executives at the company. More than one executive in the last week has sold the stock playa!! They to are taking their money and running until this blows over!!!!

AT&T – I’ll make this one short because there is a lot of hype surrounding the I-Phone. That would normally be good for my momentum strategy of beaten down stocks…but the trick is you need to know something that the rest of the public doesn’t know. I would argue the run up in AT&T may already reflect the growth from the new I-Phone. Secondly, T isn’t a pure play in wireless…you’ve got broadband and fixed line businesses that also impact earnings. I will tell you when evaluating T, one important factor to look at is churn rate. They are second in the major 4 wireless carriers in keeping their customers which is good, but they haven’t been adding new customers at an alarming rate. So you will probably point at that the I-Phone will increase subscribers with over 1 Million people already on a wait list. I concur with your comment but also point out that you don’t know how many of those customers are already AT&T customers (which boasts to have one of the largest wireless customer bases). So with that unknown variable and the fact that this product will sell out because Apple (AAPL) wants to sustain the hype by not flooding the market…there won’t be that much new subscriber growth. I do believe their will be that growth in the future but for now AT&T is a long term play. Look for a short pop around the release of the phone for a quick play but your best bet is to wait for some pullback and load up on this stock for the long haul.

Apple (AAPL) I think you are asking about AAPL not APPL. So I will analyze Apple. This is the Wall Street darling that everyone has an opinion about and some of us missed the great ride. I will admit I thought the I-Pod was going to be a novelty item and it steam rolled AAPL to consecutive quarters of great earnings. Now the I-Phone is poised to do the same. But as you read in my analysis on AT&T, I think AAPL already reflects some of the value from the I-Phone. Again with a limited number of phones being produced initially the only thing AAPL stands to gain from is the pricing power. They are selling the phones for $499 and $599. Lastly, find out how well received their new operating system upgrade will be. I do believe AAPL still has room to run, but wait for a pullback in the stock and ride the I-Phone and OS upgrade wave to higher earnings.

A little Love for Barack Obama

What does Obama and Girls Gone Wild have in common.

Exactly nothing as far as I can see. But if you check out the video at barelypolitical.com, you may be thinking that the two go hand in hand. A 24 year old busty young lady has decided to declare her love for Obama, well more like his political campaign. It is pretty creative in my book and whatever it takes to give more press to Barack and his movement...I support it. In the video, the Obama-girl dances and shakes to a catchy song that professes her love. She professes her love in the office, on the train, in the park, and with random strangers all while the camera manages to focus on Obama's...sorry can't lie Obama-girl's assets.












Lastly I'm in the process of reading Barack's first book and so far its been hard to put down. Please pick up this book as read his interpretation on the impact race and inheritance plays in America. The book is "Dreams from My Father" by Barack Obama. More to come as I complete the book.

Back That Thang Up - Ballin' on Wall Street

Juvenile has penned hit songs like Ha, Slow Motion, Rodeo, and Bounce Back...so in honor of the former Hot Boy himself I have to recommend my "Back That Thang Up" pick and tell every to back the truck up and pick up shares of:
RadiSys (RSYS) Back the truck up on this one. The big time investor David Nierenberg
is talking, so holla at cha boy b/c I'm listening. The activist investor has a core set of rules that he follows when he makes an investment. Similar to my man Warren Buffett he looks for great valuation supported by a margin of safety, a good management team, trends, strong balance sheets, and improving sales. This has led me to RSYS a stock near its 52 weak low but poised to turnaround. The stock is covered by 5 analysts with price targets well above the 52 week low. Nierenberg has been an activist in this company and continues make this an attractive purchase as a 10% investor in RadiSys. Back the truck up and enjoy.

Buy Recommendation: $12.91
Note: I will be adding positions to this stock after my recommendation.

Another stock to watch: TD Ameritrade. There has been a lot of talk about TD Ameritrade and the phrase has been consolidation. There is talk of more consolidation going on in the brokerage sector, specifically online brokers. The potential buyer is supposed to be E-Trade. Shots out to my boy over in Cali working for E-Trade...you might be handling another conversion. Buy rec: $20

June week 1 - Stock and Lock Picks

ADPT – Adaptec; Look for private equity firm Steel Partners to continue to apply the vice grip here and try to take over this company and put new management in place. Good long term potential with Steel putting there money muscle behind them, but at $4 range…should see some quick upside. Already a nice move to the upside from the 3.50 range.
Buy In Target 4.05-4.07 and anything lower.

STXX.OB – South Texas Oil Company; Significant oil well find should lead to upside in earnings revisions and price appreciation. This well is the second recent find with the potential for more to be found.
Buy In Target – 9.14 and up

CNTF - China Techfaith; This mobile device company was a great tip from my boy who has been following this stock. It has recently hit a 52wk low and should be gain from recent job cuts and what is going to be a the largest mobile and broadband market in the world....China. Buy on any bounce off of the $6 dollar mark.
Buy In Target - I love the 52 wk low of $5.50 but a more reasonable price may be $5.75

MMS - Maximus; I apologize for not posting this one but we jumped on this one around $30 dollar range. Now up almost 40%, I have thought about pulling out. However, two new contracts (state of TX and Chicago school systems) have given MMS positive earning revisions for the next quarter and year...blowing the numbers out of the water. Look for this to continue to climb as it has received a recent upgrade and a strong buy from Zacks.com "Profit from the Pros" list of Momentum stocks. Hard to pick an entry point with this rising consistently. But any pullback into the $42 range may be a good entry point.

CLCT - Collectors Universe; I love the name and the industry. A strong dividend play here and a slightly slower mover compared to our other stocks (MMS & MOBE, SBH). However, CLCT is receiving consistent attention for private equity to turn ship around. We are up 5% from the intial $13.13 mark and I still think this has room to go. With recent activity it may be hard, but I would wait for a slight pullback and I like this stock at the $13.80 range.

I will come up with some rating system but a good short term play is STXX.OB. With not as much volume as we would like a limit buy may be good here.



I am going away from the email format. This should give me a little more consistency to my post. Also here were the picks from the last quarter that netted us two big winners (This was a collection of emails forwarded, most with dates, and the earliest email listed at the bottom):

Comments for 12/1/06:

I apologize again, for the third update within a month
but we are getting some great action from the stocks
we've recommended so far. Both MOBE & SBH are up
roughly 10% today.

MOBE - Again a volatile stock and you saw people
taking profit, b/c notice for no apparent reason it
dipped yesterday sharply. It you were paying attention
their were additional buying opportunities presented
yesterday...the stock dipped below 3.30 and could have
been bought at a low of 3.21. The rise today can be
attributed to great news, we've got friends in high
places. Yesterday @ 3.21, a hedge fund bought another
round of shares which has pushed the prices up and
should create a nice floor for the stock price (They
have made 10 purchases in this stock within the last
month over 15 within the last two months{See Yahoo,
ticker: MOBE, insider transactions). And they have
cash to burn...remember the hedge fund article I sent
you. MOBE hit a high of 3.70 today which is a good
sign. I don't make predictions but I will recommend
taking profit at $4 a share and maybe leaving a few
shares to see what this stock does.
A few ppl let me know they bought the stock, I do not
recommend buying this stock at this point. I can't
guarantee you that 3.50 is a good entry point...but I
do personally think it will continue to rise.

SBH - Obviously the growth engine of former Alberto
Culver. Hence, the reason for a spinoff to fully
recognize the true value of a subsidiary. SBH is up
over 8% today. This stock could have been snapped up
by buying ACV before the spinoff (see the previous
emails) or by buying SBH the next day after the
spinoff for the opening value which was 7.30. If the
stock is up to $10, I'll let you calcuate the gains so
far. I contemplated buying mores shares this week but
was a little worried about the quick rise, when I
guess I was wrong, b/c the stock just got listed as an
"Outperform" by Bear Sterns and coverage was also
picked up by Oppenheimer, which could be considered
unusual for a small stock to track this early by to
large investment firms. I definitely don't recommend
buying more at this point because this is up almost
$50% in two weeks. I would think a better range is
back around $8 dollars.

Good luck and enjoy the weekend. If you have any
interesting stocks you've been following forward them
on.

---------------------------------------------


--- JG wrote:

> Date: Tue, 21 Nov 2006 09:19:40 -0800 (PST)
> From: JG
> Subject: Fwd: Portfolio Update
> To: xxxxxxxxxxxxxx
>
> Note: forwarded message attached.
>
> Well fellas, we got the momentum action
> that needed. Take a look at MOBE when you get
> a chance. The stock is definitely on the move
> again with strong momentum today. I usually
> don't like this many updates or even promote
> watching a stock this often,but with the
> volatility that you see here you may want to
> begin setting your price points for a quick
> exit if the volatility causes the stock
> down quickly.
>
> Take a quick walk with me and I mean quick,
> b/c if you remember my earlier email (NOV 14) to the
>
> group I recommended MOBE at roughly $3 a share
> as an entry point. I bought then and was able
> to buy more shares at $2.85. The transaction
> volume has been riding high since then and the price
> of the stock has increased to a high today of $3.60
> and is now settling in at about $3.38. If we
> see more action to the $3.60 range consinder
> taking profits and holding onto the rest for
> hopefully what Peter Lynch calls the ten baggers
> the beautiful 10 fold return. (We all can dream)
> ---------------------------------------------
> And ACV did exactly what we needed it to do. At
> remember at the price of $49 ACV decided to issue:
>
> - special cash dividend of $25
> - Give us new shares of ACV @ 17
> - Give us new shares of SBH @ 7
> add these up and you get = $49 dollars
> So basically they gave us free cash and our
> position never change. What is the current
> price of the stock
> ACV = 21.27
> SBH = 8.82
> Cash Dividend = 25
> Total = $55.09 - $49 we bought in at give us $6
> profit
> per dollar
> My math says your portfolio is already up roughly
> $6 dollars for every dollar you invested.
>
> Enjoy and I included the previous email I sent last
> week.
>
> jg
--------------------------------------------------
> From: JG
> Subject: Portfolio Update
> To: xxxxxxxxxxxx
>
> Keep your eyes peeled for the following stocks that
> I
> am digging.
>
> ACV - Alberto Culver, they are spinning off their
> Sally's Beauty division, issuing special $25
> dividend
> and shareholders get shares in both new companies.
> Historically both stocks rise after a spinoff.
> Current Ticker: ACV
> Future Tickers
> Alberto Culver (ACV)
> Sally Beauty Hldgs (SBH)
>
> This trade needs to be done b/f 11/16 which it
> appears
> will be the ex dividend date. If not you will have
> to
> buy share of the new company separately which isn't
> bad either.
>
> Also MOBE - Mobility Electronics. They make the I-Go
> adapter for all of your electronic gadgets that need
> to be charged.
>
> I like these and have added positions.