This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
The market blamed the meme stock mania of 2021 on the Federal Reserve’s monetary largesse. Now, however, when the world’s apex monetary institution is trying to reverse the financial spigot in order to clamp down on the ongoing brutal inflationary impulse, we are in the midst of yet another meme stock craze, as demonstrated by the recent rip-roaring gains in AMTD Digital (HKD) and Bed Bath & Beyond (NASDAQ:BBBY) shares.
The recurring mania in meme stocks deserves a deeper introspection, for it suggests a fundamental shift in the investor psychology rather than an accidental amalgamation of incendiary market elements. While we’ll defer this much-needed contemplation to a later post, we do want to discuss the meteoric rise in Bed Bath & Beyond shares over the past couple of days.
Over the past month, Bed Bath & Beyond shares are up nearly 120 percent. Over the past 5 trading days, the stock is up 73 percent. Without any fundamental basis for this extraordinary rally, the stock is clearly in a short squeeze, particularly when viewed in the context of its elevated short interest.
$BBBY short interest is $317M
32.34M shares shorted
52.51 % SI% of Float
34.43 % S3 SI% Float
4.57 % fee
Shares shorted up +2M shs, worth $16M, 5.41 %, over the last week.
Shorts down -$68M in 2022 mark-to-market losses;
including -$23M on today's +6.85 % move. pic.twitter.com/1Rvkp2cWar
— Ihor Dusaniwsky (@ihors3) August 10, 2022
As per a tabulation by Ihor Dusaniwsky of the S3 Partners, the short interest in Bed Bath & Beyond shares is at 52.51 percent of the stock’s entire float, corresponding to 32.34 million shares that have been sold short. In fact, such has been the ferocity of this short squeeze that the short-sellers are now underwater by $68 million in the entire 2022, based on S3 Partners’ computation of mark-to-market losses.
*(US) JULY CPI M/M: 0.0% V 0.2%E; Y/Y: 8.5% V 8.7%E (matches lower end of all analysts' estimates)
- CPI (ex-food/energy) M/M: 0.3% v 0.5%e; Y/Y: 5.9% v 6.1%e
(More at https://t.co/ttVBCsgp7R)
— TradeTheNews.com (@Trade_The_News) August 10, 2022
Of course, the broader macroeconomic environment is also supporting a near-term bullish thesis for equities, including Bed Bath & Beyond shares. Yesterday’s CPI report bolstered the view that the peak inflationary impulse is now likely behind us, with month-on-month headline CPI printing a growth of zero percent. Crucially, the core inflation for the month of July also printed below expectations. The net effect of this report was quite pronounced yesterday, with the spread between the 2-year and 10-year treasuries steepening significantly and the market reducing its overall interest rate hike projections. These developments bode well for the ongoing bear market rally, even if the wider investing world remains convinced of its brevity.
I keep hearing that Bed Bath is the next JC Penney and it makes a lot of sense especially with same store sales down an astounding 27%. almost nobody comes back from that. NOBODY $BBBY
— Jim Cramer (@jimcramer) August 10, 2022
Finally, there is yet another bullish factor that should support Bed Bath & Beyond shares going forward – Jim Cramer’s bearish outlook on the stock. As regular Wccftech readers would know by now, the CNBC anchor has quickly become our go-to contrarian indicator. The rationale here is quite simple: Cramer represents the consensus view in the market, and the consensus rarely generates any alpha. Consider the fact that the Inverse Cramer ETF offered by Index One is currently outperforming the benchmark S&P 500 index by around 5 percent so far this year.
Consequently, with Cramer confident that Bed Bath & Beyond would not be able to “come back” from an “astounding” 27 percent decline in same-store sales, the prospects of the ongoing short squeeze in the stock just became quite a lot brighter.
It is hardly surprising, therefore, that the interest in Bed Bath & Beyond shares has exceeded that around GameStop and AMC on WallStreetBets!