Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Best Buy Co., Inc. (BBY) Down On Bank of America Double-Notch Downgrade; Hedge Funds Saw It Coming

Shares of Best Buy Co., Inc. (NYSE:BBY) are down by nearly 7% this morning after Bank of America Merrill Lynch reversed its rating on the retailer to an ‘Underperform’ rating from a previous rating of ‘Buy’, a two notch downgrade. Furthermore, analyst Denise Chai tacked a price target of $32 per share on Best Buy’s stock, over 1% lower than it’s currently trading at, even factoring in today’s dip. The firm previously had a price target of $45 on the tsock. Chai, in her downgrade note, said that the second half of 2015 may be weak for Best Buy Co., Inc. (NYSE:BBY) as there is a possibility that same-store sales could decrease through the end of the year on the mixed product cycle ahead. Furthermore, she said that there are limited catalysts that may boost the stock price and that the firm’s reinvestment in its business is offsetting its efficiency efforts. Though Bank of America Merrill Lynch sees Best Buy continuing to increase capital return and performing well relative to the industry, Chai said that if second half comparable-store sales are negative, as they expect, the shares and multiple of the firm are “at risk”.

 Best Buy Co. Inc. (BBY), NYSE:BBY, Yahoo Finance,

Hedge funds were also not confident in Best Buy Co., Inc. (NYSE:BBY) in the first quarter. By March 31, total holdings of those who were still long in Best Buy decreased by 13.15% compared to the previous quarter, to $888.29 million. Furthermore, heading into the second quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, down from 50 one quarter earlier. The smart money had already been proven right before the latest downgrade, as shares of Best Buy tumbled by over 13% in the second quarter.

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 139% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

We also track insider transactions to give us an idea about the sentiment of insiders in their companies. Best Buy insiders have not bought any shares this year, but have sold some shares. Directors Hatim Tyabji and Kathy Higgins Victor and Large Shareholder Richard Schulze sold 11,250 shares each on April 6, April 8 and April 17, respectively.

Contemplating these moves, let’s review the newest hedge fund activity concerning Best Buy Co., Inc. on the next page.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.