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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