Ryan Cohen’s claim to fame is Chewy (CHWY)…
Cohen co-founded the pet-supply website roughly a decade ago.
And he cashed out in 2017. PetSmart and a private-equity firm bought the business for $3.35 billion.
Since then, Cohen has stayed busy doing typical “rich guy” stuff. That includes running RC Ventures…
Now, RC Ventures is self-described as a “seed and venture capital firm that invests in early stage companies in high growth emerging markets.”
But that hasn’t stopped the firm from making speculative bets in the market. And one in particular recently garnered a huge amount of media attention…
You see, RC Ventures poured roughly $121 million into Bed Bath & Beyond (BBBY) shares and options earlier this year. Then, Cohen went on to make a public fuss about it.
Not surprisingly, the band of social media traders known as the “Reddit crowd” caught on. And if you’ve followed the so-called “meme stock” mania, you know these traders love beaten-up and hated companies.
Ultimately, Cohen and RC Ventures made roughly $68 million in less than a year.
Retail traders pumped up Bed Bath & Beyond’s share price for Cohen. And then, they provided liquidity when he exited the entire position last week.
In other words, Cohen’s moves crushed many retail traders.
But the thing is… the Power Gauge knew better. And traders could’ve easily avoided this mess with even the briefest of glances at our system’s assessment of Bed Bath & Beyond.
Folks, this one is as straightforward as it gets. Take a look…
Bed Bath & Beyond has maintained a “bearish” or worse overall rating from the Power Gauge for most of the past year. It underperformed the S&P 500 Index for most of the year. And according to our Chaikin Money Flow indicator, it saw nearly no “smart money” activity.
Now, we don’t need to know Cohen’s true motive to understand this chart…
Bed Bath & Beyond is in a dire situation. And that was true when Cohen bought in earlier this year as well.
Even if you expected a “turnaround story” to play out, waiting for any signs of life would be the right move.
That’s even clearer from Bed Bath & Beyond’s revenue growth over the past five years. Or, I guess I should say, its lack of revenue growth…
The business is shrinking. Its revenue is down roughly 36% since 2018.
And it gets worse…
The company currently produces a roughly negative 27% return on investment. That means it loses nearly 30 cents for every dollar it invests.
This isn’t a startup, folks. We’re talking about an established retailer.
I get it…
Underdog stories are great. And it feels amazing to spot a company with the opportunity for a huge comeback.
But the Power Gauge saw this debacle from a mile away. And the Reddit crowd should’ve seen it coming, too.
With just a quick glance at the Power Gauge, these retail traders could’ve avoided disaster. But instead, they dumped tens of millions more into a rich guy’s pockets.
Cohen cashed out. And the retail traders are now stuck holding shares of a dying company.
Fortunately, with the Power Gauge at our side, we don’t have that problem.
Good investing,
Marc Gerstein
