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7 Retail Stocks That Rocked in 2013

Stocks in this article: BBY ZLC CONN RH PSUN KIRK HGG

2. Best Buy

Year-to-date Total Return (as of Dec. 12): 247.23%

Price-to-earnings ratio: 17.19

Market Cap: $14 billion

Everyone's been talking about Best Buy (BBY) this year, as the company seems to be going through a successful turnaround. Shares have more than tripled year-to-date.

Still the big electronics retailer sits in a big competitive window with retailers like Amazon and Wal-Mart taking market share. This holiday season Best Buy is aggressively going after sales, even if it pays the price of margin erosion to get them.

Best Buy's acceptance of the store as a showroom - as evidenced by the large Apple display, and its store-within-store partnerships with Samsung and Microsoft as well as its focus on online sales have given Wall Street a renewed optimism that Best Buy is still relevant to customers.

Best Buy reported on Nov. 19 adjusted third-quarter earnings of 18 cents a share, a nickel higher than Wall Street expectations. Analysts' are expecting the company to post profit of $1.61 a share in the fourth quarter, down 2% from last year.

UBS analyst Michael Lasser upgraded the stock a week earlier to a "buy" rating.

"The next phase of appreciation for the stock will be driven by estimates marching higher with the current [2014] consensus likely to move from its current level of ~$2.75 to north of $3+ and the [2015] will probably go from $3.09 to $3.50+," Lasser wrote in a Nov. 11 research note. "Thus, the multiple can contract 10% over the next 12 months and BBY's shares can still return 20%. We think this skews the risk/reward to the upside and recommend buying."

Lasser adds Best Buy's cost-savings program is like to eventually produce $1 billion in cost savings, ahead of its current goal of $725 million.

"Greater connectivity with more vendors can sustain this part of the story," the note stated. "GOOG and AMZN have been rolling out kiosks in BBY's stores. The product environment will likely tilt further towards BBY. Aside from a boost from gaming; appliances, tablets, and phones should have legs."

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