Is BEST BUY Shopping 4 A Future In RUSSIA ?

Best Buy INC. (BBY), the largest consumer electronics Retailer in the United States and Canada, appears to be taking a good look at RUSSIA (the 'R' in BRIC) as a possibility for expanding its current GLOBAL footprint (BBY currently operates over 1,300 retail locations throughout the United States, Canada, Puerto Rico, China, Mexico and Turkey). Earlier this month, the $20 Billion MULTInational corp received Russian government approval for trademark rights belonging to the 'Future Shop' brand in Russia. While Best Buy has yet to publicly voice any formal expansion plans regarding entry into the former Soviet Union, one (and by 'one' I mean 'I') has (and by 'has' I mean 'have') to believe that the large Russian market offers both attractive Sales GROWTH and excellent Geographic Sales DIVERSIFICATION opportunities to the largely North American business.

FYI, In addition to operating 'Best Buy' branded stores throughout North America, Best Buy INC. wholly owns and operates more than 150 'Future Shop' retail locations...most of which (over 130 stores) are located in Canada.

http://www.reuters.com/article/ousiv/idUSLF59351520080815

According to the Reuters link above, Best Buy filed its trademark applications with Russia's government patent agency, Rospatent, back in 2006. While trademark protection for 'Future Shop' has been received, BBY is still awaiting Rospatent's decision on the company's more well known trademark/brand name - 'Best Buy'.

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* Best Buy INC. wholly owns several SUBSIDIARIES including: Future Shop...Geek Squad...Magnolia Audio Video...Pacific Sales (Kitchen and Bath Centers)...Speakeasy, etc.

* In addition to the above listed wholly owned subsidiaries, BBY also owns sigificant stakes in both Best Buy Mobile (a joint venture with London-based Carphone Warehouse - Europe's largest independent cell phone retailer) and China's Five Star. Best Buy owns a 75% majority interest in Five Star, one of China's largest appliance and consumer electronics retailers. As of March 1st 2008, Best Buy operated 160 Five Star retail locations in China.

* Best Buy acquired Vancouver-based Future Shop in March 2001 for 500 million Canadian dollars.

* As mentioned above..In total, Best Buy currently operates around 1,300 retail locations throughout the United States, Canada, Puerto Rico, China, Mexico and Turkey.


Data Courtesy: Reuters + Wikipedia
Full Disclosure: I own shares of BBY.

ArcelorMittal's Voracious STEEL Appetite

ArcelorMittal (MT), the WORLD's LARGEST steel company, outlined the following Long Term Production Goals during an investor conference on Tuesday, 6/17/08:


* STEEL PRODUCTION --> ArcelorMittal expects its steel shipments to total 153 million tons in 2012 vs. 116 million in 2007 (30% production growth in 5 years...this seems enormous considering the current assets + size of the company - $150 Billion marketcap)

* IRON ORE PRODUCTION --> MT expects its iron ore production to reach 110 million tons by 2012 (iron ore is a raw material required for steel production)

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSL1754904620080617

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NOTE some of the recent GLOBAL growth actions/steps taken by ArcelorMittal to keep up with its aggressive steel production goals + Ultimately RULE the WW STEEL markets ! (ps: they are a very intelligent + BUSY company) :


* 25% Stake in Turkey's Erdemir --> On 6/16/08, MT announced they spent $869 million to raise their ownership stake in Turkey's Erdemir (Turkey's largest steel producer) to 24.99%...Per Bloomberg, "Erdemir, which has plants on Turkey's Black Sea and Mediterranean coasts and another in Romania, produced 5.4 million metric tons of steel last year and plans to invest $4.2 billion by 2012 to increase capacity. Ordu Yardimlasma Kurumu, or Oyak, an army pension fund, controls Erdemir after buying a 49 percent stake in the steelmaker from the government for $3 billion in 2005. Oyak Chief Executive Officer Coskun Ulusoy said June 14 that the fund subsequently increased its stake in Erdemir to more than 50 percent, without giving an exact figure...Turkey's biggest steelmaker earlier this month posted a 57 percent gain in first-quarter profit."


* Acquisition of U.S. Bayou Steel --> On 6/16/08, MT announced their acquisition of U.S. steel producer, Bayou Steel, for $475 million...Per Bloomberg, "Bayou operates from Louisiana and Tennessee. It produced about 510,000 tons of steel in 2007 and had sales of about $331 million. The company was acquired in June 2006 by Black Diamond Capital Management LLC for $180 million."


* Acquisition of Canada's Bakermet --> On 6/09/08, MT announced their acquisition of Canadian scrap metals recycler, Bakermet. Terms of the deal have not been disclosed...Per MT's press release, "Bakermet, which specializes in all types of ferrous and non-ferrous metal, processed approximately 130,000 short tons of ferrous and 40 million pounds of non-ferrous metals in 2007. The plant, located near Ottawa, will secure upstream self sufficiency in shredded metal for ArcelorMittal's Contrecoeur mill (ArcelorMittal Montreal)."


* 15% Stake in Australia's Macarthur Coal --> On 5/21/08, MT announced they owned a 14.9% stake in Australia's Macarthur Coal worth approx $605 million...Per Marketwatch, "The stake purchase spurred speculation ArcelorMittal may be making a takeover bid for the miner as part of strategy to secure raw-material supplies. Coking-coal prices have tripled in the past five months...Macarthur produces about 35% of the global pulverized coal used to make steel. Control of Macarthur would make ArcelorMittal self sufficient for about 10% to 15% of its coking coal needs, according to reports."...Clearly MT is looking to secure the raw materials it needs (coking coal) to produce steel and support its current long term production plan of record.


* 50% Stake in Gonvarri Brasil --> On 4/03/08, MT announced their 50% stake and joint venture with Gonvarri Brasil. Per MT's press release, "Gonvarri Brasil is one of the major players for servicing automotive, industry and distribution customers (in Brazil). ArcelorMittal and Gonvarri group have had a close relationship for many years - ArcelorMittal holding a significant stake in Gonvarri Holding and being a major supplier...With this acquisition, ArcelorMittal intends to build a strong presence in the Brazilian flat steel downstream segment, in line with the leadership of its Tubarão (Vitoria) and Vega do Sul plants. Synergies will also be realized with ArcelorMittal Belgo's existing distribution network in Brazil, active both in flat and long products...Today the company (Gonvarri Brasil) is one of the leaders of the flat steel processing in Brazil and its activities include pickling, slitting, blanking, cutting to length, with a total processing capacity of around 1.3 million tons of steel. The Company has 320 employees and owns more than 80,000 square meters of facilities."

http://www.bloomberg.com/apps/news?pid=20601085&sid=a32CMRQlNSMw&refer=europe

Data Courtesy: Reuters + Bloomberg + MT
Full Disclosure: I own shares of MT.

Top 5 Carbon Dioxide Emitters

According to the Netherlands Environmental Assessment Agency, China is the World's Largest Carbon Dioxide emitting country and from 2006-2007, contributed to 2/3 of the world's 3.1% increase in CO2 emissions. The U.S. is the world's 2nd largest 'producer' of carbon dioxide and its emissions rose 1.8% from 2006 to 2007 vs. China's 8% yoy increase in emissions.

Top 5 + % of TOTAL GLOBAL Carbon Dioxide Emissions:
1. China -- 24%
2. U.S. -- 21%
3. E.U. (15 countries) -- 12%
4. India -- 8%
5. Russia --6%

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* Per the 6/13/08 NEAA press release (link is below):

"In 2007, global CO2 emissions increased by 3.1%, compared to 3.5% in 2006...With an 8% national increase, China’s carbon dioxide emissions accounted for two thirds of last year’s global carbon dioxide increase of 3.1%. India, the USA and Russia each contributed about 10% to the global increase. Since 1990, global CO2 emissions from fossil fuel use and cement production have increased by about 34%. The increase in global CO2 emissions was mainly due to the combustion of the fossil fuels coal, oil and natural gas. Fossil fuel still remains the most used energy source to meet the growing energy demand...China’s CO2 emissions are now estimated to be about 14% higher than those from the USA. With this, China tops the list of CO2 emitting countries, having about a quarter share in global CO2 emissions (24%), followed by the USA (21%), the EU-15 (12%), India (8%) and the Russian Federation (6%). Together, they comprise 71% of the total of global CO2 emissions. These figures are based on a preliminary estimate by the Netherlands Environmental Assessment Agency (PBL), using recently published BP (British Petroleum) energy data and cement production data for 2007.

* In 2007, global emissions of the main greenhouse gas carbon dioxide (CO2) from fossil fuel combustion increased by about 3.2%, which is about the same as the 3.1% increase in 2006. The increase in 2007 is mainly due to a 4.5% increase in COAL consumption:

- Global CO2 emissions from coal combustion increased by 4.5%. China contributed most to this increase with an 8% increase in 2007 (vs 12% in 2006). In the rest of the world coal combustion emissions increased by 2.2%.

- Global CO2 emissions from combustion of natural gas increased by 3.1%, mainly due to increasing consumption in China, Russia, Japan and Turkey.

- Global CO2 emissions from combustion of oil products increased by only 1.1%, mainly due to a decrease in consumption in OECD countries of 0.9%, on average. In non-OECD countries, oil consumption increased in 2007 by 3.8%. China, India, Saudi Arabia and Brazil contributed most to this increase.

Total CO2 emissions from fossil fuel combustion in China increased in 2007 by 7.6%. CO2 emissions from fuel combustion in the European Union countries “EU-15” decreased by 1.9% in 2007; in 2006 the emissions remained almost constant."

http://www.mnp.nl/en/index.html

Data Courtesy: NEAA

REF - World's Largest Foreign Currency Reserves

WORLD'S LARGEST FOREX RESERVES:
*In U.S. Dollars equivalence
*Country Data figures range from September 2007 to April 2008

*World -- $7.3 TRILLION
1. China -- $1.6 Trillion
2. Japan -- $1.0 Trillion
3. Russia -- $507 Billion
4. India -- $309 Billion
5. Taiwan -- $287 B
6. South Korea -- $264 B
7. Brazil -- $194 B
8. Singapore -- $172 B
9. Hong Kong -- $160 B
10. Germany -- $153 B
11. France -- $125 B
12. Malaysia -- $119 B
13. Algeria -- $110 B
14. Thailand -- $109 B
15. United Kingdom -- $105 B
16. Italy -- $103 B
17. Mexico -- $90 B
18. Libya -- $79 B
19. Turkey -- $77 B
20. Iran -- $76 B
21. Switzerland -- $75 B
22. United States -- $74 B
23. Poland -- $73 B
24. Nigeria -- $60 B
25. Indonesia -- $58 B
Other Notables:
26. Norway -- $58 B
27. Argentina -- $50 B
28. Canada -- $44 B
36. Australia -- $33 B
40. Saudi Arabia -- $31 B
41. United Arab Emirates -- $30 B
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FOREX Overview:
According to Wikipedia.com, "FOREIGN EXCHANGE RESERVES (also called FOREX reserves) in a strict sense are only the foreign currency deposits held by central banks and monetary authorities. However, the term foreign exchange reserves in popular usage (such as this list) commonly includes foreign exchange and gold, SDRs and IMF reserve position as this total figure is more readily available, however it is accurately deemed as official reserves or international reserves...These are assets of the central banks which are held in different reserve currencies such as the dollar, euro, yen and pound, and which are used to back its liabilities, e.g. the local currency issued, and the various bank reserves deposited with the central bank, by the government or financial institutions. Before the end of the gold standard, gold was the preferred reserve. Some nations are converting foreign exchange reserves into SOVEREIGN WEALTH FUNDS, which can rival foreign exchange reserves in size."

Data Courtesy: Wikipedia.com, snagged on 4/06/08.

REF - World's Largest Steel Producers

World's Largest Steel Producers by Country according to 2007 data published by the International Iron and Steel Institute:

*2007 World production --> 1,343 million metric tons
1. China -- 489 million metric tons
2. Japan -- 120
3. United States -- 97
4. Russia -- 72
5. India -- 53
6. South Korea -- 51
7. Germany -- 49
8. Ukraine -- 43
9. Brazil -- 34
10. Italy -- 32
11. Turkey -- 26
12. Taiwan -- 21
13. France -- 19
14. Spain -- 19
15. Mexico -- 17
16. Canada -- 16
17. United Kingdom -- 14
18. Belgium -- 11
19. Poland -- 11
20. Iran -- 10
21. South Africa -- 9
22. Australia -- 8
23. Austria -- 8
24. Netherlands -- 7
25. Czech Republic -- 7

Data Courtesy: International Iron and Steel Institute.

RTOB: Is GME a Best Buy?

Random
Thoughts
Of Brilliance

Could Best Buy (BBY), the country's premier consumer electronics superstore, one day be tempted to acquire dominant videogame retailer Gamestop (GME)?

I believe a deal would make great strategic sense for BBY (or ANY other similarly large + deep-pocketed retail company that doesn't mind spending for growth) given GME's dominant marketshare in the BOOMING video game consumer market. We've now just reached the beginning of the high margin $oftware phase of the 'video game upgrade cycle' as hardware (console) sales rose to $18 Billion in 2007 (up 43% over 2006!). Now that the next-gen console base has been built up retailers can sit back, relax + expect their margins to rise as sales on much higher-margined (more profitable) video game software titles start to account for a MUCH larger piece of the revenue pie. Best Buy's NOT stupid...they see the potential in this still emerging entertainment category. During their 3Q08 earnings conference call, Best Buy identified the video game category as a major growth focus area for the company. If Best Buy were to buy Gamestop then they could potentially become a one-stop paradise for video game enthusiasts looking for games, consoles, HD cables, surround audio and of course high definition televisions.

Regardless of the fundamentals though, I see this proposed combination facing some rather significant headwinds given a host of factors including:

1.) WEAK CREDIT MARKETS + FINANCING --> According to BBY's Dec 2007 quarter, the company exited the qtr holding about $1.3 Billion in cash. Given today's tight credit market environment, BBY would probably have a difficult time raising money + financing the rest of the deal.

2.) TIMING OF ACQUISITION --> On a P/E valuation basis Gamestop shares are almost 2 times more expensive than the average S+P 500 stock (mind you, this company is also growing MUCH faster than the average S+P 500 stock...on its investor relations site GME quotes its 5 year compounded annual EPS growth rate at 75%). Also, in terms of timing, this potential deal could be deemed as too risky for Best Buy considering Gamestop is trading at 'only' a 15% discount to its all-time highs of $64/share. Lastly, given the recessionary state of today's domestic economy, BBY could be 'playing conservative' when it comes to spending new capital on U.S.-focused growth (most of GME and BBY's retail locations are inside the U.S.).

3.) SIZE OF ACQUISITION --> On a markcap basis, GME is about 1/2 the size of Best Buy. Best Buy would be taking on a whole lot of risk onto their balance sheet if they were to go through with a takeover.

4.) BBY's INTERNATIONAL SITE DIVERSIFICATION FOCUS --> For the forseeable future, BBY is probably too busy + focused on its own strategic prerogative of diversifying its store count abroad (and away from the the U.S.) in countries like China, Canada, Mexico, Turkey, India, etc. Such an undertaking is probably a gigantic in scope and would leave little time + resources to give a takeover of GME a fair 'shake'/evaluation.

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*For my own edification, here's a quick look at some interesting numbers:

P/E:
*BBY --> 14
*GME --> 38

FORWARD 2008 P/E:
*BBY --> 14
*GME --> 21

MarketCap:
*BBY --> $18 Billion
*GME --> $9 Billion

2007 Annual Sales:
*BBY --> $36 Billion
*GME --> $7.1 Billion

2007 Annual Profits:
*BBY --> $8.8 Billion
*GME --> $1.8 Billion

2007 Gross Profit Margin:
*BBY --> 24.4%
*GME --> 25.4%

Full Disclosure: I own shares of GME.