Can I profit from the Bed Bath & Beyond share price?

The Bed Bath & Beyond share price is down two thirds over the past year. Christopher Ruane explains why he won’t be investing.

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Recently an American student has been in the headlines for making millions investing in retailer Bed Bath & Beyond (NASDAQ: BBBY). In fairness, his initial investment already ran into millions. That is not a situation in which many of us find ourselves. But with the Bed Bath & Beyond share price moving around wildly lately, could I also profit by getting into the shares on a smaller scale?

Investing, not speculating

My own approach to buying shares is that of someone who believes in long-term investing. I am not trying to profit from short-term swings in share prices. Instead, I am hoping to buy small slices of great businesses at what I think are attractive prices.

That is different to a lot of speculators and short-term traders who buy meme stocks like Bed Bath & Beyond. Indeed, the student who made a fortune in the stock reportedly only held his shares for a matter of 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 swings. But that is basically akin to gambling. I think it is more sensible for me to invest on the basis of what I think a company’s long-term business prospects are. Hopefully if I am right, over time a company’s share price will reflect its business success, not just the frenzied trading of speculative hordes.

The Bed Bath & Beyond share price could sink further

On that basis, Bed Bath & Beyond does not attract me as a possible acquisition for my share portfolio.

Historically I think the retailer has had a lot going for it, from strong brand recognition in key cities like New York to benefiting from resilient demand for items such as kitchen accessories. Those attributes could help it in future too. But the pandemic has badly hurt the business, which lost money for the past three years in a row.

A recession could lead to shoppers tightening their belts, hurting sales further. Sales have already recorded four consecutive years of decline. That is not encouraging.

The company’s chief financial officer fell to his death from a Manhattan building last Friday. That tragic incident will further shake already fragile investor confidence in the Bed Bath & Beyond share price. There has been a 66% decline in the Bed Bath & Beyond share price over the past year. I think it could still go lower from here, given the mounting bad news.

My move

I remain upbeat about the demand for household goods. That is why I own shares in UK retailer Dunelm. It operates in a similar part of the market to Bed Bath & Beyond across the pond.

At Bed Bath & Beyond, sales are falling and the company is lossmaking. That is the opposite of the situation at Dunelm. The Bed Bath & Beyond share price is currently bouncing around partly because speculators have been treating it as a meme stock. As a buy-and-hold investor, Bed Bath & Beyond is not the sort of company I want to invest in right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has positions in Dunelm Group. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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