Is Bed Bath and Beyond (BBBY) A Smart Long-Term Buy?

L1 Capital, an independent investment management firm, published its fourth quarter 2020 “L1 Long Short Fund Limited” investor letter – a copy of which can be downloaded here. The Company’s NTA increased 34.4% for the quarter (ASX200AI +13.7%) and 29.5% for the 2020 calendar year (ASX200AI 1.4%). You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

L1 Capital, in their Q4 2020 investor letter, mentioned Bed Bath & Beyond Inc. (NASDAQ: BBBY) and emphasized their views on the company. Bed Bath & Beyond Inc. is a Union, New Jersey-based retail-store company that currently has a $3.5 billion market capitalization. Since the beginning of the year, BBBY delivered a 64.75% return, impressively extending its 12-month gains to 529.25%. As of March 26, 2021, the stock closed at $29.26 per share.

Here is what L1 Capital has to say about Bed Bath & Beyond Inc. in their Q4 2020 investor letter:

“Bed Bath & Beyond (BBBY) (long +19%) is a major U.S. retailer that has been struggling from many years of mismanagement, poor capital allocation and a lacklustre customer experience. Mark Tritton (a fellow Australian) was appointed CEO in November 2019 and has spent the past year replacing senior management with a proven team of high calibre executives that are now set to overhaul all aspects of the business. Tritton is an exceptional retail executive who had been instrumental in the turnaround of Target U.S. (he was the Head of Merchandising). At the time we bought in to BBBY in July 2020, the company was widely expected to go bankrupt. Short interest was an astounding 60%, almost every sell-side analyst rated the stock a “sell” or “neutral”, and the shares had already fallen from US$75 in 2015 to less than US$5 by March 2020. We believed the shares had enormous upside even if the new management team only delivered on their initial cost out targets and non-core asset sales. BBBY has since been a very strong performer for the portfolio with the new management team demonstrating early signs of success on the turnaround program and the share price almost doubling from our initial entry price of around US$9.20. At its strategy day in October 2020, BBBY announced a target of delivering ~US$850-$1,000m EBITDA in 2023 which remains well above current consensus forecasts of ~US$650m indicating the level of scepticism that remains in the market. Despite the rally in the shares, we continue to see large upside in the stock as management execute on numerous areas of low hanging fruit such as better product sourcing, higher quality private label products, more efficient supply chain, closing loss-making stores, cutting head office costs, selling non-core assets, etc. BBBY sold its last non-core asset in mid-December (Cost Plus World Market) and announced a US$150m share repurchase concurrent with the sale. We expect management will flag further large scale buybacks going forward that will demonstrate both balance sheet strength and  management’s optimism in the future of the business.”

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kevin brine /

Our calculations show that Bed Bath & Beyond Inc. (NASDAQ: BBBY) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Bed Bath & Beyond Inc. was in 33 hedge fund portfolios, compared to 32 funds in the third quarter. BBBY delivered a 57.31% return in the past 3 months.