Best Buy [NYSE:BBY - $35.59] is the largest consumer electronics retailer in the U.S., with about 20% of the $170 billion market. With its 2009 acquisitions, the firm increased its share of the $700 billion global consumer electronics market to roughly 6%. Best Buy also operates under the Future Shop and Five Star trade names in Canada and China. They operate over 2400 Best Buy Europe stores as well as Magnolia Home Theater, Pacific Sales Kitchen and Bath, and Geek Squad here in the U.S.

The bankruptcy of rival Circuit City has allowed Best buy to increase its already market-leading  share of the US space. FY 2010 [ends Feb. 28, 2010] will show the highest revenues ever at an estimated $49 billion. December 2009 sales were up 13% year-over-year.

Here are BBY’s impressive (split-adjusted) per share numbers from continuing operations as reported by Value Line:

* FY 2010 includes consensus estimates for Q4

Zacks now sees FY 2011 coming in at $3.33 /share making BBY’s multiple about 11.5x trailing and 10.7x forward earnings estimates. That’s the lowest valuation for BBY since the lows of 2000 and 2002. Buyers of Best Buy at those times saw the shares rebound from $9.30 to $35.80 (from December 2000 to March 2002) and from $11.30 to $59.50 (from November 2002 to April of 2006).

Just a quick glance at the chart above will show that both sales and earnings have surged over the past decade while the P/E has compressed. BBY’s valuation has rarely been this compelling despite the fact that fundamentals are expected to be at all-time highs in the fiscal year starting March 1^st.

Dividends were initiated in calendar year 2003 and have been steadily increased to today’s $0.14 quarterly rate. At today’s close that provides a well-covered current yield of 1.57%.

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Calamos Asset Management Inc. [NDAQ:CLMS - $13.05] is a publicly owned investment manager. The firm provides investment advisory services to individuals, institutions and private foundations. They manage separate client-focused open-end and closed-end for its clients. CLMS also offers separately managed accounts to its clients. Their investment strategies cover  equity, global/international, balanced, high yield, convertible, and alternative investment classes. The firm employs qualitative and fundamental analysis with both top-down and bottom-up stock picking approaches. Calamos Asset Management was founded in 1977 and is based in Naperville, Illinois.

CLMS came public in late 2004 and attracted a lot of investor interest. Their shares rose from a 2004 low of $19.40 to an April 2006 high of $44.10 as EPS grew at a nice rate while the markets were booming. Earnings dipped a bit in 2007 before falling off a cliff in 2008 when the market melted down.

CLMS was caught in a forced liquidation mode in late 2008 when the credit markets froze. They de-levered, cut the dividend and regrouped by reducing head count. While painful, these actions set the stage for a big rebound in 2009. All four quarters showed huge improvements in year-over-year earnings and Q4 came in well above estimates.

Assets under management climbed from $25.276 billion as of year-end 2008 to $32.714 billion on December 31, 2009. Their investment performances has been stellar allowing for both organic asset growth and net new money flows into their funds. The closed-end Calamos Convertible Opportunities and Income Fund announced a secondary share offering this January when the shares were at a premium to NAV. This will immediately add a nice chunk of new AUM to their permanent fund base (as closed-end funds do not make direct redemptions when public investors sell their shares).

Here are their per share numbers from continuing operations as reported by Value Line:

Current estimates for 2010 and 2011 EPS have been raised to $0.92 and $1.09 respectively putting the multiple at about 14.2x this year’s and < 12x next year’s expectations. That’s quite low by historical standards for CLMS shares as can be seen in the chart above.

Another measure of how undervalued these shares remain is to look at their present price/book value relationship compared with their historical ranges. Here is a chart showing their annual highs and lows versus book value.

Excepting the period from late 2008 through early 2009 the price/book value for CLMS never went below 1.9x and it ranged from 2.0x – 4.8x book value at some point during each calendar year since their 2004 IPO. By year-end 2010 book value should be about $8.25 /share. A return to even two times book value would lead me to a $16.50 target price – 26.4% above yesterday’s closing price of $13.05.

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DST Systems, Inc. (NYSE:DST - $39.45) is a global provider of information processing and computer software services to the financial services industry (predominantly mutual funds and investment managers), telecommunications industry, the healthcare industry and other service industries. They operate through two segments: Financial Services and Output Solutions. The Financial Services Segment’s revenues come from remote or full-service transfer agency or third-party administration product offerings that utilize the Company’s software applications. Output Solutions’ revenues are derived from presentation, delivery and archival of customer documents.

Yesterday’s slightly disappointing Q4 report sent DST shares down to $39.45 putting in on the day’s worst percentage performers list. Was this justified? I don’t think so. After netting out both positive and negative one-time items the fourth quarter and 2009 EPS came in at $0.92 and $3.59 respectively.

That was the second best earnings performance in the company’s history trailing only the all-time record results of $3.77 /share from 2008. That puts the P/E at just 11x last year’s earnings. After hearing the Q4 announcement Standard and Poors lowered their 2010 and 2011 estimates to $3.97 and $4.20. That puts the forward multiple at an even lower 9.94x.

Here are DST’s per share numbers from continuing operations as reported by Value Line:

Clearly, the company has shown outstanding growth over the past decade in revenues, cash flow and earnings. Despite that long-term record of success the share price is now at its cheapest P/E ever (excluding the late 2008-2009 market melt-down period). At yesterday’s close of $39.45 these shares are now available at lower than the absolute lows during calendar years 2004-2005-2006 and 2007. In those years EPS went from $2.50 to $3.50 compared with 2009’s ‘disappointing’ $3.59. Peak prices in 2004 – 2007 ranged from $52.50 - $88.70.

Value Line rates DST ‘above average’ for safety and assigns them an ‘A’ for financial strength.  They also note their ‘earnings predictability’ as being in the top 1% of all 1700 stocks in their research universe. DST’s ‘share price stability’ falls into Value Line’s top 10% despite the near-term volatility.

It certainly would not be a stretch to believe that DST’s valuation can revert back to a still lower-than-typical 14x forward earnings. If the S&P estimate is near the mark, that would lead to a $59.55 12-month target price. That somewhat conservative target would bring a better than 50% gain from the current quote. Standard and Poors now lists their estimate of DST’s ‘fair value’ as $52.30 /share. Morningstar is a bit lower in their ‘fair value’ estimate at $50 /share. Even that is 26.7% above yesterday’s closing price. Value Line is using a 15x multiple in calculating their 3 – 5 year goal range of $70 - $95 /share.

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TJX Companies is America’s largest off-price retailer of brand-name apparel and home fashions. TJX offers family apparel through its T.J. Maxx, Marshalls, A.J. Wright, Winners, and T.K. Maxx chains. They sell home fashions through its HomeGoods and HomeSense stores. TJX operates 2,600-plus stores in the United States, Canada, the United Kingdom, Germany, and Ireland.

In a recessionary world, it’s difficult to find companies that have not only weathered the economic storm but that have prospered. TJX is one of those rarities.

FY 2010 (ended Jan 31, 2010) is expected to have come in at about $2.75 /share versus FY 2009’s $2.01 /share. Consumers appear to have traded down to the off-price stores from their higher priced competitors. This was the fourth straight year-over-year improvement in EPS and the 12^th in the last 13 FY’s.

TJX pays a $0.12 quarterly dividend for a current yield of 1.25% at today’s quote of $38.45 /share. The dividend has been raised in each of the past 13 years.

Here are their per share numbers from continuing operations as reported by Value Line:

* FY 2010 data includes Q4 estimates

Consensus views for FY 2011 are now centered around $3.03 - $3.10 making the TJX multiple about 14x last year’s and < 12.7x forward projections. Those are very low P/E’s by historical standards (excepting the crazy market action from late calendar 2008 to early 2009.

TJX has a nice balance sheet and receives Value Line’s ‘A+’ rating for financial strength and VL’s top safety score. They also garner 90^th and 95^th percentile rankings for ‘stock price stability’ and ‘earnings predictability’ (with 100^th being best). Their Beta is low at about 0.85.

If this year’s estimates are on the mark and the multiple rebounds to a still lower-than-normal 14x then TJX shares can rebound to about $42.50. That would represent a 10.3% rise from this afternoon’s price.

My target price seems attainable and perhaps a bit conservative. Standard and Poors sees ‘fair value’ as $44.60 and carries a $44 12-month goal price.

Overall these high-quality shares offer 10% - 15% total returns with above average safety. Not bad, but far from truly exciting.

Here’s a way to play these shares that can leverage that same move into a much bigger one-year return:

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PepsiCo [NYSE:PEP] manufactures and markets salty snacks as well as carbonated and noncarbonated beverages and foods. The firm’s organizational structure constitutes three primary business units: PepsiCo Americas Foods, PepsiCo Americas Beverages, and PepsiCo International. The company’s broad portfolio of brands includes Pepsi, Gatorade, Tropicana, Frito- Lay, Doritos, and Quaker.

PepsiCo has pulled back from a recent high of $64.48 and an all-time peak of $79.80 (in 2008) to this afternoon’s quote of $59.55 /share. Was there any bad news to account for this? Not really. EPS dipped slightly from a record $3.34 in 2007 to $3.21 in 2008 before rebounding last year. 2009 is expected to have come in at about $3.72 once Q4 results are posted in early February.

Zacks now sees $4.17 /share for 2010 putting PEP’s multiple at about 16x last year’s and 14.3x this year’s estimates. To get a feel for how cheap that is for PEP take a look at the per share data from continuing operations as reported by Value Line:

PepsiCo has shown remarkably steady growth in sales and earnings while also increasing its dividend more than three-fold since 2000.

Value Line assigns PEP their highest safety and financial strength rankings and notes their ‘stock price stability’ and ‘earnings predictability’ are both in the top 1 percent of all stocks in VL’s 1700 stock universe.

The 10-year average P/E has been 21.9x versus the current forward multiple of 14.3x. The current yield of 3.02% is better than almost any other time during the past two decades. It’s also higher than what’s now available on money market accounts and 1 – 3 year CDs.

It would seem that a rebound to at least 17x projected earnings will be likely sometime over the next 12 – 24 months. That (still below-normal) P/E would bring PEP back to over $70 based on 2010 projections.

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Coke shares need no introduction. This high quality, good yielding issue has dipped with the market from a recent high of $59.45 to finish today at $54.14/share. EPS hit an all-time high in 2008 and are expected to have come in slightly higher for 2009 once Q4 earnings are released.

KO garners Value Line’s highest ratings for financial strength, safety, stock price stability and earnings predictability. They also have the approval of an obscure investor named Warren something or other.

Here are Coke’s historical per share numbers from continuing operations as reported by Value Line:

* 2009 data includes Q4 estimates

At today’s close of $54.14 KO shares trade for < 15.8x the 2010 consensus estimate of $3.43 making the present multiple near the lowest of the past 20 years. The dividend is now 3.03% based on last year’s payout.

A rebound to even a 17.5x multiple on forward estimates would bring KO shares back up to above $60 by year-end. That would be a 10.86% rise from here. Add in the yield and 13% - 14% seems like a conservative 12-month target. 

Is that reasonable to expect? Value Line is using a 21 multiple for their 3 – 5 year projections. Standard and Poors now carries a 12-month goal of $65/share while assigning KO their highest, 5-star rating. Morningstar has a ‘consider selling’ price of $68.80/share.

KO shares hit peak prices of $64.30 - $65.60 in 2007 – 2008 and touched $59.45 pretty recently.

While Coke does not seem to have home-run potential it does seem a good bet to creep higher as its earnings and dividends grow over time.  The longer the time period the surer you might feel that KO shares will be higher than today.

Under that scenario here’s a nice two-year play that could generate outstanding total return with a pretty low risk profile.

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