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Recently an American student made headlines for investing millions in retail Bed bath and beyond (NASDAQ: BBBY). In all fairness, his initial investment was already in the millions. This is not a situation many of us find ourselves in. But with the Bed Bath & Beyond stock price moving wildly lately, could I also benefit by acquiring shares on a smaller scale?
Invest, not speculate
My own approach to buying stocks is that of someone who believes in long-term investing. I don’t try to take advantage of short-term fluctuations in stock prices. Instead, I’m hoping to buy small slices from big companies at what I think are attractive prices.
It’s unlike a lot of speculators and short-term traders who buy stocks from memes like Bed Bath & Beyond. Indeed, the student who made his fortune in the stock would have only held his shares for a few weeks.
As billionaire investor Warren Buffett says, in the short term the market is a voting machine, but in the long term it is a voting machine. In theory, I could speculate and try to make money on short-term price fluctuations. But it’s basically gambling. I think it makes more sense for me to invest based on what I think is a company’s long-term business prospects. Hopefully, if I’m right, over time a company’s share price will reflect its trading success, not just the frenetic trading of speculative hordes.
Bed Bath & Beyond share price could drop further
Based on this, Bed Bath & Beyond does not appeal to me as a possible acquisition for my stock portfolio.
Historically, I think the retailer has had a lot of upside, from strong brand recognition in key cities like New York to resilient demand for items like kitchen accessories. These attributes could also help him in the future. But the pandemic has severely hurt the company, which has lost money for the past three consecutive years.
A recession could cause buyers to tighten their belts, further hurting sales. Sales have already recorded four consecutive years of decline. It’s not encouraging.
Last Friday, the company’s chief financial officer died from a building in Manhattan. This tragic incident will further shake investors’ already fragile confidence in the Bed Bath & Beyond share price. There has been a 66% decline in the Bed Bath & Beyond stock price over the past year. I think it could go down further from here, given the bad news piling up.
I remain optimistic about the demand for household items. That’s why I own shares in a UK retailer dunelm. It operates in a similar part of the market to Bed Bath & Beyond across the pond.
At Bed Bath & Beyond, sales plummet and the business is loss-making. This is the opposite of the situation in Dunelm. Bed Bath & Beyond’s stock price is currently bouncing back in part because speculators have treated it like a stock meme. As a buy-and-hold investor, Bed Bath & Beyond is not the kind of company I want to invest in right now.