Bed, Bath and Bankruptcy
Good morning everyone.
Bed, Bath and Beyond (BBBY) filed for bankruptcy over the weekend in typical shitco fashion. The equity will be interesting to keep an eye on given the meme stock status and potential for any restructuring. I plan to read the bankruptcy documents as they get filed for curiosity purposes and to get better informed on what happens during a restructuring. If you missed it, I have recently invested in a bankrupt company that looks pretty interesting.
This week will be pretty busy with earnings for Q1 starting to come out. Keep up with the news flow in the Telegram channel (for pro subscribers). Long-from updates will hit your inbox as they come out.
Insider buying activity has slowed down given the blackout periods but should pick up as Q1 reports are released and executives are no longer in blackout.
Lastly, I wrote up a tiny little company last week. Check it out and let me know your thoughts. It might be one of the most interesting situations I have seen in a long-time.
Now before we get into the insider buys of the week, first a word from today’s sponsor…
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Insider Buys And Other Unique Ideas
The Singing Machine (MICS) had a small insider buy this past week. The buys have been coming from a gentleman named Milton “Todd” Ault III. I have seen Ault’s filings pop up before on other microcap stocks. Ault is the founder of Ault Alliance, BitNile (NILE), DPW Holdings and a number of other microcap companies that have had a history of shareholder losses and investments in strange technologies. Ault has a shadier history, but despite the past history, he has become quite aggressive and now owns over 57% of the total company. The market cap of The Singing Machine is only $4.6 million and is trading at a multiyear low. There is $.27 million of cash on the balance sheet, $7 million of accounts receivable, $10 million of inventories and only $1.7 million of debt and $2 million of payables. The business model is selling karaoke machines and toys to kids. Revenues have plummeted over the past year and losses are starting to mount. If the company liquidated now you would make a good return selling off the inventory, collecting the AR and returning capital. Ault might see this as his play and the reason for the big increase in his ownership. Ault will talk to you if you reach out to him. This name looks pretty unique and actionable.
The CFO of Joann Inc. (JOAN) purchased a decent amount of shares in the open market. Joann is a beaten down retailer that trades with a market cap of only $73 million. The short interest is 24% so there might be some torque in the share price should any positive news flow. In the most recent quarter the company executed on a new credit agreement and talked about reducing annual costs by $20 million. There is $200 million of cash on the balance sheet offset by $976 million of debt — high cost of over 10%. Outside of the trade name impairment and adding back D&A, the company did generate operating income. The company is highly levered and trends are not heading in the right direction. But the insider buy at this depressed level is nice to see. If the company survives this is a multi bagger. If they can’t turn around comps, take out costs and generate cash it is a zero.
There was a $110k insider buy at a small microcap called Cosmos Health Inc. (COSM). The company is a $33 million market cap Pharma company and has $20 million of cash and $13.5 million of debt on the balance sheet. I am not familiar with the story but there has been two bullish and well written articles on Seeking Alpha (here and here) that go over the thesis. This might be a good one to spend an hour or so on to see if there is any juice in the thesis. The recent share repurchase program and de-levered balance sheet seem like positive events for equity holders.
The biggest bank insider transaction of the past week occurred with ServisFirst Bancshares (SFBS), with the CEO purchasing $150k in the open market. ServisFirst Bancshares is a $2.7 billion market cap bank that is down 40% over the past years. The dividend yield is 2.2% and is trading with a P/E ratio of 11x and P/B of 2.0x. The bank is based in Alabama and has incredible profitability metrics.
Bed Bath & Beyond (BBY) filed for bankruptcy over the weekend. 480 stores (360 Bed Bath & Beyond and 120 buybuy BABY) will remain open as the rest of the assets are auctioned off during the restructuring process. I’m not sure what happens post-restructuring, but if the equity ever trades again it might be a good one to keep an eye on.
A pro member recently highlighted his recent buy of ADMQ in the comment section of my most recent writeup. ADMQ was first bought up in a previous edition of “insider buys of the week”. The stock trades at only $0.04 and remains unknown, illiquid and interesting. The member stated that their new production facility will 5x their business and they currently remain profitable — a rare feat for a company with a $0.04 stock price. The CEO owns 40% of the company.
Disclosure: I don’t own any stock mentioned in today’s newsletter.
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