Bed Bath & Beyond (BBBY) – Fade the Double Algo Drop

Many value-based stocks fall on the ex-dividend date on the basis that some corporate cash was distributed to the prior owner, and some owners who were waiting until the dividend to cash out might sell after getting the dividend.

The combination of both of the above can create a serious downdraft in a stock, particularly if it is a poorly performing one which is seeing declining margins.

Mix in an analyst downgrade & look out below.

Bed, Bath & Beyond does have some decently differentiated goods in their stores. And when a first-time parent buys things for their children touching & feeling them is important.

I think BuyBuyBaby and Cost Plus World Market (both subsidiaries of Bed, Bath & Beyond) are perhaps 2 of my wife’s favorite 3 or 4 stores. That said, the demographic headwinds from record low domestic fertility rates  coupled with the continued squeeze of the middle class from all the health care scams have put a crimp on the company’s performance.

If the scams in healthcare ever get dealt with then the new parent category has a lot of people ready to join the ranks & that could put a serious bid under BBBY. But that isn’t a bet worth holding your breath for as being early is the same thing as being wrong.

Yesterday Bed, Bath & Beyond fell over 6% on a quarterly dividend distribution of 16 cents a share (a bit under 1% of the share price) and an analyst downgrade.

Their stock is off about 75% since the 2014 peak, so it absolutely hasn’t participated in the retail recovery narrative & isn’t something I would want to hold long-term until the turn around efforts start to show some promise.

Not a great idea to catch that falling knife, which has been the wrong trade for close to a half-decade straight, even as QE has inflated global financial asset prices.

Not sure if the early morning rise today is a dead cat bounce (likely) or something heading higher on a sustained basis (not so likely) so I sold out 15 minutes ago for a ~ 1.3% gain.

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