Bed Bath and Beyond Absolute and complete disaster. And it shows you the danger of investing in Momentum Movers and actually trying to hoddle Momentum Movers. Now look, I'm not here to bag on Bed Bath and Beyond I like my 20 off coupons as much as the next person and I grew up as a millennial going to Bed Bath and Beyond and buying. you know Oxo stuff and the KitchenAid mixers, you know, and the towels.

They always had so much inventory of towels, it was so cool. So I want that color this season and that color? That's I Miss the good old days of retail stores and Bed Bath and Beyond it's nostalgic. It's it's just as nostalgic. and being in line at GameStop for the midnight release of every single version of World of Warcraft okay or Splinter Cell Okay, it didn't matter what midnight released it was, Call of Duty I was there.

It reminds me of the good old days of Black Friday where there's so many people in the store you felt like you were on a Japanese Subway and you were about to suffocate to death because there were so many people there. or you are in a South Korean alley. Okay, no too soon for that. So anyway, look, we got to know what's going on with Bed Bath and Beyond because the darn stock ran up almost a double.

And one of the biggest warnings that I've had is when it comes to momentum-based stocks. When we know this, as soon as the momentum goes away, the stock. Falls It's very simple and the goal though, is to trade that, right? So what happens is you get volume increases. The stocks skyrockets when the volume goes away.

The stock. Falls It's the simplest trade ever. The problem is people will hold on to their trade because they think, oh, we're in the next momentum wave. but the companies that are facing profitability problems or they're becoming a penny stock or which basically a Bed Bath and Beyond has become because they're facing bankruptcy.

These companies need to raise money. So here's a company that actually did the smart thing. They actually are now trying to take advantage of the meme movement. And so as their stock ran up 92 percent yesterday, what does the company do? Oh no surprise, they conduct an offering.

This is what I've been warning for months: Be careful about getting into profitless companies. There's a reason that I say that the companies you want to pay attention to are companies with high free cash flow. You want stable revenues, even even in the face of discounts, right? And you want ideally strong margins. Those are the companies you want in my opinion, to invest in.

Now this isn't personalized. Financial Advice for you: I Don't know what your situation is, but I am Eliza's financial advisor I Run an ETF uh and I do this stuff for a living on a daily basis. And the big concern about putting a lot of your money into companies that don't have high free cash flow that are losing money and don't have strong margins is the potential that you're just going to get diluted. So that way the company can stay alive just a little bit longer.

And that's exactly what Bed Bath and Beyond did yesterday. They basically announced a near 1 billion dollar series a convertible stock offering in warrants. The company expects to raise 225 million dollars of gross proceeds uh, from the offering together with another 800 mil from the issuance of Securities related to their warrants. Now this is basically to say they're going to their company to their stock and they're saying hey, look, our company has a market cap of 700 million dollars after a meme rallied up nearly double from 350 million dollars.

Approximately, why don't we just raise a billion dollars which is more than our market cap and as long as we get investors. hey, maybe it could help us avoid bankruptcy and what are we going to do with that money? Well, we're going to buy some inventory. We're going to make sure we pay off the inventory debts that we owe. like using this hundred million dollars to pay off our first and last out facility.

We're going to pay off the outstanding loan facility that we have under our Abl facility. Whatever, it's like a credit line, right? We're going to make payments on the missed interest payments on the notes that we have that are due March 3rd and maybe we'll have some money over to prevent us from going into bankruptcy. But no guarantees. If we can't raise this money, we might still end up going bankrupt.

So anyway, what they're basically doing is they're pulling an AMC. They're taking every meme, investor and Momentum investors money and they're basically saying hey, thanks for buying our stock we're now going to dump on you and we're going to make you lose the money that you're now being a bag holder on basically and we're going to use that to try to bail out our own company. This is basically the same exact thing that AMC did with Ape. and yeah, sure, AMC has been rising recently, but when we zoom out, we can clearly see what's been happening with AMC.

The trend is not great now. AMC is doing their best to pay off their debt, but they're doing so with your money. As an investor in the company, as an investor in a company who's losing the company's losing money, they will take the equity you provide to them and the liquidity you provide to them in the stock market and use that to pay off debts. This is what companies do that lose money and this is why I Prefer companies that have free cash flows, positive operating margins, up a positive operating leverage.

They can increase their their revenue or keep revenue stable while maybe reducing Opex right or growing up X at a lower rate and Bed Bath and Beyond is not that. Look at this. This is a company that has net sales ending in the quarter November 26th of 1.25 billion dollars. The sales at Bed Bath and Beyond have plummeted by about a third.

Look at that 1259 divided by 1877. That puts you at a decline of about 33 in sales. So sales are falling 33 percent their gross margin. Uh, or their cost of goods sold sits somewhere at 78.

Nearly 78 of every dollar they make is going into actual cost of product. But then they've got this insane operating expense. Uh, where they actually end up with an operating loss of around 450 million dollars net income here, loss of about nearly 400 million dollars. They're losing money like crazy.

And if we jump on over to their cash flow statement, let's see what they got. We got the balance sheet over here so we could look at it in just a moment. we look at their cash flow statement. Here's their net loss and their actual cash flow is negative: 307 million minus an additional 100.

Mil In Capex, you're sitting at around negative 400 million dollars in cash flow. For folks, the three months ended in November. If you go to their negative cash flow for the last nine months of believe this is this is negative cash flow. Yeah, nine months ended.

November Their negative cash flow is actually 890 plus 322.. their negative cash flow. in nine months is 1.2 billion dollars. Oh look, that's literally three times their current negative cash flow.

So they're literally losing 400 million dollars a quarter. 400 million dollars a quarter divided by 90.. this company is literally throwing out the window. 4.4 million dollars a day.

That's what this company is burning just trying to stay alive. It makes absolutely zero fundamental sense that the company would rally at all on anything other than just stupid Momentum trading on a penny stock. That's all this is. And so it's no surprise that when there was Stupid Momentum trading on a penny stock with with a, you know, a small market cap and low liquidity in the share price, because who in the right mind is actually buying this to hold it? It's no surprise that when the company issues a suggestion that, hey, we're going to try to raise a billion dollars, we're going to dilute all our shareholders.

It's no surprise that the Sucker Falls uh, nearly over 40 percent. Now it's remarkable because some people who don't understand math very well will say, but Kevin it's up 92 percent. Now it's now. it's down 40.

That means it's still up more, right? Uh, no, that's actually not how it works. See, we're sitting over here at three dollars and fifty cents and the sucker memes up nearly double. But if you double and then you lose half, you're basically at the same spot, right? I Mean, think about it if you have a five dollar stock and it doubles, you're at ten dollars. If you now Fall By half, you're right back at five.

Math is fun. Anyway, it is absolutely ludicrous that anybody would touch Bed Bath and Beyond stock with with any more than a complete speculative mindset. And when you look at a company like Bed Bath and Beyond you should run the suckers going bankrupt and it doesn't have assets like Hertz People look at these bankrupt companies and they think these bankrupt companies are going to kill it like Hertz did post bankruptcy. but people forget that.

The reason Hertz did well post bankruptcy is because they had assets that were going up in value, not down in value. They had used cars during the used car shortage and guess what that meant? It shot the asset value of Hertz to the moon. So of course companies went in to bid the crap out of Hertz because they had a lot of good product used cars that became substantially more valuable than the original estimates. uh, for what uh, what the assets were worth at Hearts.

So Hertz ends up meme stocking up through bankruptcy, recovers from its restructuring and because they have all this inventory and these incredible buyouts. and then they end up with new management that actually gets into leasing electric vehicles and they rebuild they used to or the the leasing business and they get new inventory after selling out their old inventory at a profit. It's no surprise the company does well after bankruptcy. That is very different from Bed Bath and Beyond The according to Bloomberg the executives had a meeting with all their staff and guess what the executive said to help solve their problems.

They're like we need more corporate staff instead of working from home. We need you all coming in an extra day and somebody yells out of the audience like picture this okay I picture this to sort of you got like a table of Executives like all right guys, we're going to try to save the company and in doing so, less work from home, more in person Face to Face Time And and then you get the people in the audience that are like somebody shouts out allegedly somebody shouts out and goes working. Coming in one more day is not going to make our company not lose money and apparently the audience like the other employees at the company start nodding and basically cheering and clapping like yeah, exactly like right on like why don't you actually fix the damn company and the reality is Bed Bath and Beyond is a failure Bed Bath and Beyond is a Sears It failed to adapt, it failed to pull a Best Buy Now that's my opinion. Okay Best Buy Used to be a fantastic store, a great competitor against Circuit City Then their return policy started turning to crap and their customer service went to trash.

The company started failing, the company was going and trending towards bankruptcy. They were going to become the next Circuit City And they were going to go bankrupt. But guess what bad? Uh what? Best Buy Did they realized? Wait, we need to loosen our return policies. We need to get into e-commerce and we have to focus on better customer service.

And guess what? Best Buy is a success story. They turned it around. You could buy stuff online on their website. Their inventory management system is even better than Walmart's Walmarts is trash.

Walmart tells you they have stuff in stock and then they don't Then they cancel your order a few hours later. I'm sorry you don't actually have it in stock. It's like your website says we have in stock. Yeah, our systems aren't aligned with what we actually have online versus what we actually have in store.

and I'm like you. This is like an elementary problem. Y'all are idiots. Uh, but that's Walmart for you Best Buy and Walmart doesn't even make that much money.

There's no reason like their stock should plummet. There's no reason their socks doing as well as it has been over the last year. The only reason it has been doing so well is because it's deemed a staple and people move into Staples in a recessionary time. So you're basically getting Trader momentum in Walmart anyway.

And it's Trend momentum too anyway. Best Buy Adapted Best Buy became a functional online e-commerce platform that you can actually use Best Buy as a competitor. At Amazon you could price match with Amazon you could get your product same day, which you can't do with Amazon and they really sell you on those. Services Now I'm not saying you need to use those and I've never used them myself, but now you buy a TV at Best Buy they'll come install it for you.

They'll do the mount for you. Want to buy an appliance? Why would you buy it on Amazon If you could go have Best Buy Do it all for you. start to finish and install it for you and make it all easy for you. Want to buy a surround system for your home? Why buy it on Amazon Where you have to figure out what all the damn wires do? When you can just hire Geek Squad to do it for you? It's actually very, very smart.

Amazon's been trying to get into it by subcontracting to local vendors, but it's been very difficult for Amazon to actually pull off successfully and they've kind of been winding back that program because it's been hard for them. whereas Best Buy actually has local employees who can do it for you. It's pretty impressive, but it shows you how different a company like Best Buy is from a loser like Bed Bath and Beyond I Hate to say it, but that is what it is. So I don't know, that's that's my stick on Bed Bath and Beyond and the rip-off and that's happening in sort of the Momentum world.

And why? If you are fomoing? because you see certain Momentum stocks that are going up like 30 percent and the quality companies that you're investing in are going up like four or five percent, right? You should be looking at those meme stocks and going thank you. Because eventually when meme stocks run up, the Quality Companies come up and then the meme stocks get diluted and they plummet and crash and burn. So think about it as a good thing.