Nobody sell more consumer electronics and appliances than

Best Buy

(BBY) - Get Report

. Revenues are on track to exceed $52 billion this fiscal year (ends February 2011). EPS are expected to come in between $3.57 and $3.70 for the year, just wrapping up and to rise to about $3.90 in fiscal year 2012.

Thirteen of the past fourteen years have shown improved year-over-year earnings. Dividends were initiated in 2003 and have been raised six times since to its present rate of $0.15 quarterly. At Monday's close of $42.17, that's a very secure current yield of 1.42%.

BBY's multiple is a very reasonable 11.7x this year's estimate versus a 10-year median P/E of 18x. Total debt is under 15% of capital. In short, BBY is a high-quality, moderate dividend stock with a solid balance sheet and a low valuation.

Best Buy (BBY) EPS Source: Value Line View Chart

To me that spells 'low risk'.

I am not overly bullish on the general market, so my play with BBY will be a market-neutral strategy that produces a good total return, even if these shares do absolutely nothing over the next 14.5 months.

If BBY simply stays above $40.00 through January 20, 2012:

* The calls will be used and the puts will expire worthless.

* You will have collected at least $600 in dividends.

* You'll end up with no shares and $40,600 in cash.

This very conservative play would generate a net profit of $40,600 - $30,170 = $10,430.

$10,430/$30,170 = 34.5% cash-on-cash achieved in just 14.5 months on shares that rose, stayed unchanged or even declined by as much as 5.1%. Where else can you find a 28% annualized return on blue-chip shares that don't even need to move up?

If BBY fails to be $40.00 or above on January 20, 2012:

* The calls will expire and the puts will be used.

* You will be forced to buy another 1000 BBY.

* You will need to lay out an additional $40,000 in cash.

* Your final position will be 2000 BBY and $600 (from dividends).

The net cost of those 2000 shares? $30,170 + $40,000 - $600 = $69,570 = $34.79 /share. That's less than 9.8x the current year's estimate and about 8.9x the expected EPS for the FY ending closest to that expiration date.

What is BBY worth? Morningstar and Standard & Poor's see fair value as $48.00 and $49.50, respectively. BBY shares have actually changed hands at prices from $41.50 to $53.90 during each calendar year since 2003 including 2010's high of $48.80. Value Line rates its financial strength as 'A' and notes they have outperformed 85% of all shares for long-term 'price growth persistence' and topped 90% of their research universe in 'earning predictability'.

Trades: Buy 1000 BBY for $42.17 per share, sell to open 10 BBY January 2012 40 calls at $6.80 and sell to open 10 BBY January 2012 40 puts at $5.20.

At the time of publication, Paul Price was short BBY puts.

Dr. Price joined Merrill Lynch in 1987 and over the next 13 years worked with A.G. Edwards, Wheat First and Ferris, Baker Watts. Dr. Price enjoyed enough success to retire in October 2000, but he continues to write and give investment seminars.

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