The electronics sector is a dog-eat-dog business and that is unlikely to change in the years ahead. If anything it may even become more competitive as time passes and companies dig in. However, Best Buy (NYSE:BBY) makes it look easy and going forward, the company looks well poised to maintain its position as a market leader.

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Why Best Buy?
Although there are small mom and pop electronics chains in communities throughout the U.S., none appear to be a serious threat to Best Buy. After all, Best Buy is huge, has deep pockets, which means it can afford to expand and grow, and it has the ability buy merchandise at a good price. It continues to aggressively market multiple popular products to electronics loving individuals.

For those that doubt Best Buy's prowess and standing, look at the company's financial results this past year, which was clearly one of the most difficult environments ever as most will agree. It has beaten expectations in three out of the past four quarters by a good size margin, which stands out in a good way. It seems likely the company may again surprise the Street when it releases its fourth quarter numbers on the 25th.

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While Wall Street is looking for the company to earn $1.79 per share, the earnings could come in two cents or more ahead of that number. Moreover, although there are clearly no guarantees in retail or the equity markets, management could offer an upbeat outlook for the next several quarters because of the more upbeat consumer and economic environment in general.

What might draw additional interest among investors to the electronics space, and by extension Best Buy, is all of the chatter about 3D TVs. While this is not likely to be a huge part of the company's business in the very near future, new products can draw investor interest and foot traffic.

Other Stores That Can Compete
Radio Shack (NYSE:RSH) doesn't seem to enjoy the popularity that Best Buy does in the investment community, but the company has certainly been doing something right. The company's recent performance and specifically its generally consistent and impressive bottom line beats are good reasons to take a look.

If the company can keep up surprising analysts in 2010 and 2011, the company could certainly win a slew of new fans and the stock could have further upside potential for its current $22.75. Radio Shack's recent momentum in its share price is also likely to draw a fair amount of attention from the retail and institutional set.


Sears Holdings (Nasdaq:SHLD) sells televisions, appliances, and many electronic products through its Sears stores and its Kmart stores, which are popular in many areas of the country. The foot traffic could get a boost in coming quarters because of improved macro conditions that were outlined above, but the company has so many other deep pocketed, cash abundant competitors that offer similar merchandise, it doesn't seem like the best play right now.

On the flip side, Wal-Mart (NYSE:WMT), which sells electronic goods at low prices and heavily advertises its sale items, is a company that will be a major player in electronic sales going forward, particularly as it expands its U.S. footprint. While it's not a straight play in consumer electronic goods, one could argue that its diversification and its involvement in other merchandise from house wares to bath products to automotive products is a plus.

Finally, Amazon (NYSE:AMZN) and its online model cannot be overlooked in this comparison. Good management and its ability to turn in solid earnings throughout the economic mess show that it is for real and is resilient with a capital R. Although not cheap at more than 60 times earnings, it has huge potential for growth both on the electronics and the book front. The popularity of its Kindle product may also provide a reason for investors to get into the stock.

The Bottom Line
The demand for electronics going forward should be strong and that leads yours truly to believe that exposure in this space may make sense. With a vast selection, good service, all the latest wares, a large store base, and good growth potential, Best Buy appears to have a bright and desirable future. (To learn more, see Analyzing Retail Stocks.)

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