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Window-Dressing Pressure Helps Buoy Market, but Can't Help Bed Bath & Beyond

The broader market is doing OK, but the retailer of household goods disappoints again and, like GE, sees its stock in a vortex.
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The FAANG stocks and Apple Inc. (AAPL) in particular are providing a good example of end-of-the-quarter window-dressing pressure. At the end of the quarter, money managers have two concerns. The first is having some good stocks in their portfolio so that clients will feel good. The second is to maximize returns so that the maximum fees can be collected.

Money managers don't want to be too blatant about the mark-up action, but when J.P. Morgan gives Apple an "overweight" rating it provides great cover for managers who want to make sure that AAPL finishes the quarter near the highs.

Outside the FAANG names the action is very mixed. Breadth is running 3,250 gainers to 3,000 decliners and there are more new 12-month lows than highs once again. It has been unusual to have this level of lows compared to highs when the indices are still so close to their all-time highs.

There isn't much happening out there as the Brett Kavanaugh Supreme Court nomination hearing is a huge distraction, but one particularly ugly spot is the action in Bed Bath & Beyond Inc. (BBBY) , which missed estimates and cut guidance. The biggest positive that Bed Bath & Beyond has going for it is that fundamentals are weak, the chart stinks and everyone already hates it, so who is left to sell?

The answer is that there still are plenty of "stuckholders," or stockholders looking for an exit. They have kept hoping BBBY would turn it around, but after the poor report last night they are likely to give up hope. It is not unlike General Electric Co. (GE) , which steadily drifted lower and lower over the past year as the bottom fishers who wanted to believe all the bad news was already out and fully priced were proven wrong. Like GE, BBBY is at its lowest point in decades.

There are investors who do well playing the deep-value game, but that game is best played only after the stock has been thrown in the trash heap and been forgotten. Bottoms tend to occur with a whimper and not a bang. Bed Bath & Beyond still has too many holders reacting to this news, which may help keep it elevated in the shorter term. As you can see from General Electric, trying to guess when a broken stock finally will stop trending down is an impossible task.

Unfortunately for BBBY, it is neither fundamentally or technically attractive. While some people may like the idea of buying low, it is important to understand that stocks at their low have a tendency to go even lower.

At the time of publication, Rev Shark had no positions in the stocks mentioned.