Bed Bath & Beyond, Inc. (NASDAQ:BBBY)

- Company buying back tons of shares - float reduced from high of 300 million shares down to current 128 million shares as of last quarter.
- With share price even lower today, if they spend the same $ this quarter on buybacks, they will buy back over 10% of the remaining available float. If the stock price does not rise, they could theoretically buy back all shares in 10 quarters.
- Current dividend is ~ 8%. As they buy back shares, they will be able to raise the dividend further. As they retire shares from buybacks, they no longer have to pay a dividend on those shares and can redistribute that money to increase the dividend for remaining share owners.
- They recently reduced costs through layoffs and closing underperforming stores. So, earnings should get a bump from that. going forward.
- Cash on hand last quarter was ~ $900 million. Plenty of cash to last through restructuring.
- PE ratio extremely low compared to peer group. BBBY forward PE is 4.7 and peer group is around 13. A simple return to normal PE will double the stock.
- Debt is $1.4 billion, but does not mature until 2024, 2034, and 2044.
- There is almost zero insider sales this year. There were a couple sales in the first quarter, but not big sales and there have been none since. If insiders expected the company to fail they would have been selling off in the teens earlier this year.
- I bought a small position at $9.40 and a larger position at $8.55 - both in the last 4 weeks.
Would love some feedback from anyone if you see any holes in this thesis. The only way see this trade failing is if the co goes out of business, and I just don't see that happening. I could also see them getting acquired at this low price. Thanks

This is one of those businesses where if you closed you eyes and try to value it you will probably find some favorable upside. In fact if I model -5% sales growth and -1% gross margin contraction I still get an intrinsic value for this company over 2x it's current stock price.

Do I love the business no.. but this is a business everyone hates and usually when everyone hates the business there is value to be found.

I wouldn't consider this a Buffet value stock, more of a deep value stock at this point, where I would probably sell a 50% gain (even though that's below my intrinsic value estimate). Management has done a horrible job with capital allocation and has got paid a good amount to be bad managers... not a company I love, or even like, or would buy. Simply just trying my hand at a value play.