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Gamestop was a phenomenon as it ran from under $5 to over $450 in just a few months. It also took a few hedge funds down with it. 

But some news came out yesterday that could put THIS next stock on the Radar of a whole bunch of Reddit Apes!

Yesterday Bed Bath & Beyond (BBBY) announced that activist investor Ryan Cohen had taken an almost 10% stake in BBBY. Mr. Cohen is the current chairman of Gamestop (GME), and his leadership is one of the reasons GME was so popular with retail investors. Cohen is the co-founder of Chewy Inc (CHWY), and his moves are followed closely by retail investors and so-called Reddit Apes!

BBBY was already a MEME stock back in 2021, as it ran from $18 to over $40 the same time GME exploded. It became a part of the MEME basket of stocks, which included GME, AMC, KOSS, and NOK. GME and AMC were the head of the snake, and the others traded in sympathy. 

Most of these are legacy Brick and Mortar businesses that weren’t doing too well and had a significant short interest. Thus the Reddit Apes target these stocks to “take down the evil hedge funds.” 

The news yesterday that Ryan Cohen was taking an almost 10% stake in the company, could be the beginning of a turnaround story. In his letter to shareholders, Mr. Cohen says that Bed Bath & Beyond’s strategy is failing to stem sustained market share losses, noting that core sales dropped 14% from a year ago in the most recent quarter.

He writes that BBBY needs to narrow its focus to fortify operations and maintain the right inventory mix to meet demand, while simultaneously exploring strategic alternatives that include separating BuyBuy Baby, Inc. (“BABY”) and a full sale of the company. 

He also says that given Buybuy Baby’s growth trajectory, it could be worth several billion dollars.

He says the company should better align leadership compensation with results.

Purchases

As we can see from the above purchases, it appears Mr. Cohen has accumulated stock somewhere in the $14-$16 range on average. He also purchased a lot of call options above $60 and $80, expiring in January 2023. 

These options are around 300% higher than current prices indicating that Mr. Cohen either thinks the company is severely undervalued or is anticipating the possibility of another short squeeze similar to GME and is positioned for such an event. BBBY has a short interest of 25.51% currently, according to Finviz.

 

Technicals

As we can see from the chart above, after the initial run-up to $40 in Jan 21, BBBY has failed at the $40 level on numerous occasions, including 3 times in June and July. It has tended to sell on the news, as seen in November and yesterday. 

However, given this new Ryan Cowen catalyst, if BBBY can consolidate above $20, another test of $40 could be on the cards. Above that level, anything is possible, as we saw with Gamestop, given the level of short interest and amount of retail Apes following the stock.

Author:
Jeff Bishop

One of the best traders anywhere, over the past 20 years Jeff’s made multi-millions trading stocks, ETFs, and options. He is renowned as an incredible trader with a deep insight and a sensitive pulse on the markets and the economy. Jeff Bishop is CEO and Co-Founder of RagingBull.com.

Even greater than his prowess as a trader is his skill and passion in teaching others how to trade and rake in profits while managing risk.

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