Yesterday’s Winners: Best Buy Edition

We all know the adage, “yesterday’s winner is today’s loser,” or some variation thereof. That’s why it’s no surprise to see Best Buy tanking on the back of a sales report that showed its holiday revenue results coming up short.

Investors punished Best Buy shares after the report was released, driving them down over 28.5% at last look. This is probably hard to believe for some because Best Buy was one of the S&P 500’s top performing components in 2013. But those who think back just a little further will remember that Best Buy seemed on the verge of bankruptcy in 2012.

The moral of this story is that the risk/reward tradeoff is real. If you bought nearly-bankrupt Best Buy shares at the end of 2012, you looked great through 2013. You took a big risk and got a big reward. But if investors are still holding those shares today, they are being punished for taking on too much risk.

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jjones

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