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Bed Bath & Beyond Inc. Message Board

  • phil_fgv phil_fgv Jan 29, 2009 10:24 PM Flag

    Let me make something clear

    Folks, I was out all day running errands -- hence, my absence from the board.

    Anyway, let me issue my take on the tape. The other guy on the board posted a pretty good summary of what's going on. Let me add a bit to what he said.

    In a sea of dismal news, there are pockets of resilience like the MCD's and WMT's of the world. But, make no mistake about it, even those will get taken down (it has already begun with WMT). MCD's? Good story, but overowned. I wouldn't short it, but the stock will likely not see 52-wk highs for many years. The bottom line is we're in a Depression (got that? Capital D).

    There are 3 types of stocks that will be navigating the Depression: survivors (WMT, MCD), companies that will get the crap kicked out of them (BBBY, BBY, GOOG, AAPL, PCLN, EXPE, etc) and bankruptcies (debt-ladden homebuilders like LEN and commercial real estate bellwhethers such as VNO and BPO come to mind).

    Regardless of what category any one company falls into, one thing is certain: they will all see deteriorating business. Take a step back for a sec. Who on this planet thinks AMZN deserves a 34 multiple in this environment? That's 2x the multiple of AAPL and a 30% multiple to GOOG. Yeah, it's that silly.

    Let me also go out on a limb and make a bold statement about the next 24 hours (yes, I'm that certain given the window of time that's left for critical news to come out): this market WILL NOT and CANNOT push higher tomorrow. You see, this week saw a lot of back-and-forth and it's easy to get lost in the volatility. We were basically in wait mode for Friday. But the bottom line is this. XOM, which represents more than 5% of the US stock market is reporting tomorrow morning. And yes, it's overvalued. Worse, however, is that the big boys have woken up to that fact in the last 3 days -- with downgrades from UBS and Goldman. The stock has begun to slowly sell off but there are still a lot of herd-mentality funds who have been hiding in this blue-chip for the last 6 months with their fingers crossed. Everyone and his dad (and the dad's broker and and their cousin) is going to be a heavy seller of the stock when reality (ie, that XOM will not be earning what it was earning at $100+ oil) sets in tomorrow morning. Earnings will be bad -- despite analysts attempts to lower earnings expectations in the last week to minimize disappointments. Here's a stock trading at a 60% 2009 earnings multiple (I averaged 2004 and 2005 earnings when oil traded between 30 and 70 to project what they would earn this year at an average oil price of $50) premium to its 10.5 P/E historical multiple.

    Anyway, here's the bottom line. AMZN beat earnings, but at 18% EPS growth and a 34 multiple with a technical bearflag on the daily chart and the AH move getting largely faded, I'm making a bold bet for tomorrow. AMZN will get faded on high volume tomorrow. Retail stocks that haven't joined the SP-500 rally of the last week (ie, BBBY) will underperform as we reverse lower.

    The SP-500 is also sitting at the 50-day moving average, so we already have had our bounce and are poised to pullback. BBBY, in its position of relative technical weakness, will accelerate to the downside. I haven't made this kind of a prediction before, but I'm going to be very specific. BBBY will push below 24 tomorrow (not sure if we get a close below 24, but we certainly print 24 and change).

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    • No prob. Maybe buy some physical here (tiny amount). If it pulls back, keep adding. That's what I told a buddy of mine who isnt in the financial markets. He said everytime he buys something, it goes down like 15-20% and he ends up puking it out at a loss. I told him to buy physical (this was last year when gold was at 850. It then pulled back to 700. I told him to add, he finally bot more at 750. He's managing it better that way.

      That way you don't check it on your computer every 2 sec and don't get tempted to sell by pressing a button. The physical purchase fosters more the investor in you. And that's what gold should be -- an investment, not a day or swing trade.

      Silver is also a good bet -- perhaps even better than gold, given how out of wack the gold-silver ratio is right now.

    • nice job...congrats...i am not that bold so hats off!!!!!

    • Thanks for the post it's good to know what a pro is doing phil.

      The biggest challenge for me so far was to decide if hyperinflation or deflation would be the end result. It seems to me that the depression will continue to be deflationary for some time (Japan-esque). Agree that betting against the weaklings/overvalued companies that were designed for bubble conditions seems safest for this environment.

      At some point I'd like to go long hard assets and companies that will do well in a world of rapidly dwindling resources, but I see that move in the space of years not days or weeks. I'm pretty sure BBBY won't be on that list 'cause Peak BBBY occurred somewhere around 2006 har har har

      • 1 Reply to gestumble
      • The one sector I'm positive on long-term is gold. The US wont allow the system to collapse, so theyre going to keep printing insane amounts of dollars to devalue away the currency and debase the debt as they go.

        Watch for gold/silver to ABSOLUTELY ignite higher over the next few years. Also, the TBT is a safe long-term bet as foreign governments diversify away from the dollar and into their own infrastructure projects and gold.

    • like the analysis keep it coming. I'm not convinced we'll see a D, i think it will be a longer recession but not where we see 20% unemployment - reason is that we are approaching the bottom of the trough in the real estate market (less than a year away now) certainly jobs will continue to deteriorate for several quarters but the core of the financial system will mostly stabilize. I think a significant cut in capital gains tax or business tax or govt spending will put a dent in this negative feedback loop we are currently in.
      XOM - will be sticky but it will give up the ghost - tomorrow guessing 75 will hold but will deteriorate for too many reasons to count - lengthy bear market in oil far outlasting real recession, govt' intervention/investment in anything but oil mentality will be too much to overcome.
      BBBY is dead money right now but wouldn't be surprised that somehow we don't see significant deterioration until next earnings release

      I do think this market will continue to bifurcate and the wheat will be separated from the chaff and JPM, CNA, EIX, HMA, XL will start to return to non-armageddon pricing

    • Sorry, typo. I meant to say, BBBY will print 23 and change tomorrow (below 24). Not sure if we get the CLOSE below 24 or not. Still, given how volatile the tape has been, I will take 1,000 shares off at 24 even and 1,500 off at 23.50 (just a nudge below the 50-day where we certainly will find support).

      If we reverse back up and retest 25.50 or 26 at some point in the future, I will reload those shorts. In the event BBBY continues to push lower and never sees 25.50 or 26 again, I will ride it down with 3,000 shares, which isn't optimal, but I'll take it.

 
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