Best Buy: Mr. Market Teaches a Hard-Learned Lesson

It is often said that life gives you a test, then teaches you the lesson. Much of the same can be said about investing. Developments and speculation in the market can cause some investors to act irrationally, leaving a hard-learned lesson in the end. Case in point: Best Buy (NYSE:BBY).

What Happened?

Shares of the big box retailer surged 16 percent on Thursday after the Minneapolis Star Tribune reported that founder and largest shareholder Richard Schulze is prepared to take Best Buy private. At the time, he was expected to make a fully financed offer of at least $5 billion to $6 billion by this Sunday, a “hard” deadline to make such as move.

Many consider a buyout from Schulze as the last chance for Best Buy shareholders to see a significant boost in the stock price. Competitors such as (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) have easily outperformed the retailer, and consumers seeking the latest iGadget usually shop at Apple (NASDAQ:AAPL) stores. Shares of Best Buy have plunged nearly 50 percent this year and 70 percent over the past three years.

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Although Best Buy logged an impressive double digit gain on the news, it served as a harsh lesson as to why the average investor should not pile into a stock purely for hope of a buyout…