Meme Stock:Vanguard Increases Stake in Bed Bath & Beyond; Are Meme Stocks a Buy?

Exchange-traded fund company Vanguard has increased its stake in meme stocks bed bath beyond (BBBY), According to reports. As of December 20, it owned 8.57 million shares, or a 7.31% stake, compared to 8.20 million shares in the third quarter.

X

BBBY is closing its Canadian stores. It plans to reduce its retail store count to 360, along with 120 Buybuy BABY stores. Previously, Bed Bath & Beyond said it didn’t have the money to pay off its debt. It was also not possible to find a buyer.

The company also said it had defaulted on its $500 million loan JPMorgan Chase (JPM).

Caught between debt and a liquidity crisis, the company plans to raise $1 billion worth of stock. The home goods stock found a hedge fund, Hudson Bay Capital Management, which it says will be a key investor The Wall Street Journal. That will lower the value of each BBBY share.

BBBY shares trade at around 2 apiece.

According to IBD MarketSmith, the Union, NJ-based company reported a 33% drop in revenue of $1.25 billion and a loss of $3.65 per share in the fourth quarter.

The retailer rose over 200% to 53.90 in January 2021 and returned to its long-term averages for the rest of the year. It then rose more than 30% to 30.06 in March 2022, with frantic buying after Ryan Cohen bought a 9.8% stake. Shares plummeted in August after he gave up his position.

Clever moves from AMC

AMC (AMC) different prices are charged for different cinema seats. The three-tier pricing is based on the location of the seat.

Meme stock has made clever moves to revive its faltering share price and mounting debt.

The cinema chain plans to reduce debt to zero by converting its preferred stock “APE” into common stock. The conversion of preferred stock into common stock is not uncommon, but getting shareholders to approve the conversion can be difficult.

Upon conversion, the aggregate value of AMC shares outstanding will increase from $524 million to $550 million. That’s not good, as the stock price is likely to fall. But AMC gets its preferred shareholders to vote alongside the common stockholders. That could turn the tide in favor of the swap.

AMC also announced plans for a 10-to-1 reverse split on December 12. Will the dual action of paying off debt and the number of shares outstanding save AMC stock? Both plans have yet to be approved by an extraordinary shareholders’ meeting.

How did your online broker perform in the IBD Best Online Broker 2023 Survey?

Has the cinema stock done the right thing to improve liquidity and protect itself from the perfect storm of rising interest rates and plummeting stock values?

Stocks have soared during the pandemic but have fallen to near all-time lows. AMC issued APE units last August.

Meme Investor takes a stake in Alibaba

GameStop (GME) Chairman Ryan Cohen is known for investing in meme stocks. Its stake in GameStop benefited as a short squeeze in 2021 propelled the stock to its all-time high of 120.

X

In August 2022, the contrarian investor bought a large position in Bed Bath & Beyond for $15 and change, only to reportedly sell the shares and options for $178 million. BBBY surged to 30 and plummeted to 6 in September.

His recent involvement in Alibaba (BABA) seems to have a different goal. Cohen is reportedly pushing for more buybacks from the Chinese e-commerce giant. Alibaba increased its buyback from a previous $40 billion. Cohen sees double-digit revenue growth and 20% free cash flow growth and is pushing for higher buybacks.

Buybacks tend to increase the value of outstanding shares.

Alibaba is not a meme stock. The investor began buying BABA shares through holding company RC Ventures in 2022. Cohen has indicated that he prefers companies whose valuations are lower than their fundamentals.

Is Tesla a meme stock?

misfortune for snowballs Tesla (TSLA) in 2022. The stock traded at a high of 390.91 in December 2021 and fell more than 50%, breaking its 50- and 200-day moving averages.

Unpredictable movements are common in meme stocks. Tesla’s price action resembles some meme stocks at times, but otherwise lacks the distressed or boom-bust nature of meme stocks.

The stock is up 50% in 2023 and broke above its 50-day moving average. But there is still a lot of repair work to be done.

Are Meme Stocks a Buy Now?

Meme stocks are speculative games known for their high degree of unpredictability, as they can go up or down in any market at any time. Their meteoric rises and heartbreaking falls typically depend on social media hype and online interest.

Hyper stock valuations for these companies depend in large part on young fans and an anonymous fan base that can appear or disappear overnight. Retail investors dominate interest in these stocks.

These stocks follow traditional investing wisdom that says you should buy stocks based on growth and performance.

Top meme stock to watch

GameStop reported revenue declined 8% to $1.18 billion from $1.29 billion in the third quarter. A loss per share of 31 cents was slightly better than the 35 cent loss last year. Meme stock surged over 11% in strong volume after the Dec. 7 report. The action sparked a mini-meme rally, though the stock is far from its 2021 frenzy.

The video game retailer built a following in late 2020. In January 2021, the stock shot up 1,625% to 81.25 and then plummeted to 15 in February 2021. However, it rose again to 265 by mid-March. GME has fallen back to last January’s levels. His chart shows no clear pattern.

YOU MAY ALSO LIKE:

Top growth stocks to buy and watch

Learn how to time the market with IBD’s ETF market strategy

Find the best long-term investments with IBD Long-Term Leaders

MarketSmith: Research, charts, data and coaching in one place

How to research growth stocks: Why this IBD tool makes finding top stocks easy