Why Best Buy's Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronics retailer Best Buy (NYSE: BBY  ) are up 10% today on speculation the company's founder would make a buyout offer.

So what: According to reports, founder Richard Schulze is working with Credit Suisse to explore a takeover, although no one will confirm the reports. He may also be trying to push a turnaround effort into high gear as his 20% stake in the company becomes worth less and less by the day.

Now what: As dire as Best Buy's stock performance has been the company's financial performance isn't as bad as you may think. The company is expected to earn $3.62 per share this year, meaning shares trade at just over six times earnings, so a buyout would be an interesting move. I wouldn't bet against the buyout, but betting for it or trying to pinpoint a price isn't a gamble I like either.

Betting on buyouts is risky business and can lead to wild swings in a stock's price, both up and down. But if you like the turnaround effort and the value shares currently trade at I don't think this is a bad bet at the current price.

Interested in more info on Best Buy? Add it to your watchlist by clicking here.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.

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10/21/2016 4:03 PM
BBY $39.46 Down -0.02 -0.05%
Best Buy CAPS Rating: *