Bed Bath & Beyond has been the latest target of meme stock trading activity, and Barron's reporter Jacob Sonenshine joined Cheddar News to discuss what's behind the new rally and why it differs from the last Redditt-fueled mania. "The magnitude of the moves are much lower, still pretty big moves, but nowhere near what we saw in January 2021. You see, you would see a stock go from a few bucks a share to a few hundred bucks a share, which makes no sense." 

Closing Bell

Meme Stocks Are Back With Bed Bath & Beyond

Welcome back to closing bell on cheddar news everyone. The meme stock madness coming back with a vengeance on monday sending shares a bed bath and beyond Gamestop and AMC surging, trading in Gamestop halted mid session while the Reddit fueled spikes tied to short interest on the stocks. A stock dividend announcement by A. M. C. As well as the Cohen effect. As chu is co founder Ryan Cohen is chair at the Gamestop board and his firm RC Ventures does hold a 10% stake in Bed Bath and beyond. So despite the surge yesterday, the stocks appear to be coming back down to earth today. You see they're all down about 6% for AMC Gamestop bed Bath down 17%. So joining me now is Barons Reporter Jacob Sunshine Jacob thanks so much for coming on the show. What is this? It's good to see you, what are the main drivers of this latest activity that we saw this week? You're seeing the meme stocks trade pretty much in line directionally in line with other speculative assets. Bitcoin and really super high growth unprofitable growth technology companies. So that whole trade that speculative asset trade since about mid june has been back and one of the reasons is because there's, the market is starting to sniff out that the Federal Reserve is going to slow down the pace of interest, great hikes and you've seen the surge higher in interest rates stop, you've seen that stabilize. And what that means is that if you can get now you're in terms of interest rates, you have a much lower than a few months ago rate of return on a risk free asset. So when you have a lower rate of return on a risk free asset that is no longer surging. People have much higher risk tolerance and they'll pile into speculative risk your assets again. Okay, so let's talk about how this time might be different than the meme stock saga that we saw play out at the start of 2021. At the end of January, huge, massive, massive games. I mean, Gamestop was $483 a share. How was some of the speculative trading that we've seen of late different perhaps than what we saw a year and a half ago? Absolutely right. It is a little bit different. It's still pretty parabolic trading. But the key difference is that one, the moves here for your am season and game stops and bed bath and beyond. They are much less. The magnitude of the moves are much lower, Still pretty big moves, but nowhere near what we saw in january 2021 you see, you would see a stock go from a few bucks a share to like a few 100 bucks a share, which makes no sense. You're still Seeing huge moves, but nothing like the moves we saw January 2021 and one of the reasons is because yes, retail investors are still engaged driving this action. We're seeing in the last few weeks here for the meme stocks, but way less than than the percent of trading volumes represented by retail that we saw in January 2021? How do professional traders feel about meme stocks these days? I mean, if you're a professional trader, you just, if you want to make a little money on a move like that, whether you're long or short, you just look at where speculative trading action is going, where, you know, interest rates are going, um, you're not gonna take a quick, you're not going to take a look really at all at, at the fundamentals. These come, um, the moves are just pretty crazy. I mean, you just kind of look at it okay, It's really, maybe a few weeks ago. Okay, these stocks are really, really depressed and I think interest rates are going to calm down and if that's what you thought in mid june, you would have made some good money on a long position. That's probably how a trader is gonna think about it. As meme stocks remain volatile. Jacob what do investors need to know before piling into some of these shares they need to number one understand are they trading? So are they now? I mean, I'm not, I'm not making any calls here, but it at this point, it's probably a better, I don't know about shorting it, but there's much less long exposure to be had because, because the move we've seen. So you have to know, are you a traitor? And are you looking at the correlation between speculative assets and interest rates or are you actually a longer term investor by the way, Bed Bath and beyond is trading the market cap? It is trading for less than expected sales. So that's a company that's actually trying to turn itself around. So Bed Bath and beyond can actually turn itself around. And you think that you're a long term investor, not a short term trader, then maybe there's an opportunity, there are these meme stocks different. It sounds like you might be a little bit bullish Jacob. I know you're a reporter on Bed Bath and beyond is the same the case for AMC and Gamestop. For AMC and Gamestop. I'm not sure exactly in terms of what those companies are doing to, to improve their outlooks. Obviously, AMC has quite an uphill battle just the business that it's just theaters. But I don't know if there's the same upside you've seen in the last month or so. But I do think it is my thesis that you're gonna see rates on long Treasury bonds remain stable and you probably are gonna have some more runway for speculative assets like meme stocks like Bitcoin or like super small cap growth technology. Mhm. Well, we've seen some of these retail stocks struggle this year. Bed Bath certainly has an inventory problem Jacob that as you're indicating here it is trying to turn itself around? How should traders and investors look at these companies knowing that the stock price movement on any given day can wildly overvalue or undervalue some of these businesses, I don't know Bed bath and beyond that well, but I I I can tell you that it's market cap is less than a billion and its sales are several billion. So specifically for bed bath and beyond. If you are an actual investor, what you always have to do and Warren Buffett will tell you this is ignore the noise. I don't even care. Bed Bath and beyond is down several percentage points today and it's up a ton in the last month or so. All you have to do is look at the price of the company today and look at its earnings power tomorrow. I don't know if Bed Bath and beyond can pull off the turnaround that it's going for, but if it can, then buying today would probably be a pretty good idea. Alright, Barons Reporter Jacob Sonnenschein Jacob, great to have you on the show. Thanks so much