3 BIG reasons to hold onto your JB Hi-Fi Limited shares

Electronics retailer and ASX 200 Index (ASX: XJO) stock, JB Hi-Fi Limited (ASX: JBH), has grown alongside such other great retailers as Harvey Norman Holdings Limited (ASX: HVN) to become a household name for computers, TVs and mobile devices. When retail trade began picking up in 2012, the stock quickly rose from about $10 in early 2013 to around $23 within about ten months, rewarding shareholders with a 100%+ share price gain.

Since then it has been trailing down, now around $19.15 a share, so is the fizz gone? More recent retailing news is downbeat and not encouraging, so traders are probably giving the whole sector more of a pass until stronger sales results come out. I believe this is actually a time when Foolish investors should be looking further down the track several years from now. The economy may not be booming, yet we’re very far from anything like the GFC.

You make your best returns when you buy good quality companies at low prices and then sit back for the long-term growth to pay you for your patience. Here are three reasons why holding onto your JB Hi-Fi shares will pay you back later and you’ll be patting yourself on the back for your savvy investing decision.

1) Company sales resilient to weaker general retail trade.

While other companies like Super Retail Group Ltd (ASX: SUL) and department store Myer Holdings Ltd (ASX: MYR) are showing weaker sales, JB Hi-Fi just updated the market last month, reaffirming its earlier earnings guidance for FY 2014 to be 8.3% – 10.8% up on the prior year. One plus is the growing housing market which can drive electronics and appliance sales.

2) Still in growth phase with more stores coming.

Its JB Hi-Fi HOME store format rollout is ahead of schedule and showing very promising results. These stores sell white goods and household appliances in addition to the electronics it is well known for. It expects to have 22 HOME stores in FY 2014 and by FY 2016 that number could be up to about 75. With strong initial comparable sales growth for the new stores, earnings over the next few years are forecast to be rising thanks partly to this expansion.

3) Uptrend of return on equity shows management is keeping up good work.

One of the signs of deft management performing well is an increase in return on equity. That shows they are squeezing more value out of every dollar earned. The company’s ROE is regularly over 40%, which is fantastic by itself, but the long-term trend is up. Companies with high ROE can be long-term high performers, which drives earnings and share prices up over the years.

An even better bet for your money

Retailing is a quick moving industry with new entrants popping up while others wither away almost as quickly. That's why you should stick with the market leaders with successful business models like JB Hi-Fi. I think holding onto the stock is a good move for future gains. It even offers a healthy 3.9% dividend yield now as well.

However, there is another company which could be even greater... After eight consecutive years of profit and dividend growth, this little known ASX company has certainly earned its position as The Motley Fool's TOP analysts' #1 dividend pick for 2014Simply click here for your FREE copy right now.​

Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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