The surging stock market during the first half of this year pushed shares in many companies higher. While simply buying the S&P 500 index would have netted fine results, there were a few companies that saw their stocks explode higher as their turnaround stories played out.
Left for dead at the end of last year, these companies have put the pieces back together and given investors serious gains in the process. Here’s a look at two of the most lucrative comeback stories so far this year.
The “death” of retail
After trading at $11.85 per share at the beginning of the year, consumer- electronics retailer Best Buy Co., Inc. (NYSE:BBY) has surged over 200% to around $37 per share today.
The decline
Shares of Best Buy Co., Inc. (NYSE:BBY) reached a high in the mid $40’s in late 2010, before beginning a two-year collapse. The stock lost three-quarters of its value by the end of 2012. Much of the decline was a result of slowing revenue growth and falling margins, a condition brought on by intense competition from online retailers like Amazon.com.
Another factor occurred in May 2012 when then-CEO Brian Dunn resigned after an affair between Dunn and an employee was discovered. Founder Richard Schulze also resigned from the board after failing to follow up on the issue.
The comeback
A new CEO, Hubert Joly, was hired to turn around the ailing Best Buy Co., Inc. (NYSE:BBY). However, the dominating headline through the beginning of 2013 was Schulze’s proposed buyout of the company. The deal fell through, but Best Buy Co., Inc. (NYSE:BBY) shares had already surged into the $20’s.
Joly introduced the Renew Blue strategy to cut costs and become more competitive. Thus far, Joly has eliminated a few hundred million dollars of annual expenses, balancing the new price-matching policy and more aggressive pricing in general.
Last quarter, the decline in same-store sales slowed as earnings beat analyst estimates, and with both Samsung and Microsoft mini-stores installed in hundreds of locations Best Buy Co., Inc. (NYSE:BBY) is on track to be the premier destination for consumer electronics once again.
The future
While Joly still has plenty of work to do, Best Buy Co., Inc. (NYSE:BBY) is making good progress. Online sales are growing, and with a website redesign under way, Joly is putting a lot of resources into growing the online business. Even after the 200+% run in the stock price, Best Buy is still inexpensive relative to its potential. A net income margin of 3% on $45 billion in annual sales yields earnings per share of nearly $4. Best Buy now trades at about 9.5 times this number, which very well could be severely pessimistic.
Remember Qwikster…
After selling in the low $90’s at the beginning of the year and as low as $53 in 2012, shares of Netflix, Inc. (NASDAQ:NFLX) have rocketed more than 480% from their 52-week low and are up 230% year-to-date.
