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I covered my short yesterday. I have shorted successfully in the past, with bbby, yet this time i was unsuccessfull. Losing only a point, but also about 6 months. really poor research on my part this time. I was tied up on their inventory turns and potential overcapitalization.

I do find myself to be a contrary indicator. no joke, i would not be surprised to see the market drop, now that i covered a short. still very short others, and i dont see that changing for another 3 months or so.

here are notes from an unamed meeting i went to last week.

I questioned something like the following: “
Are you at all concerned with BBBY inventory turnover ratio, being low at 2.5, yet it has been like that for many years. Do you think the purchase of Buy Buy Baby, from the sons of Feinsteen for over $86M was not totally arms length, especially since it appears to be less than 400,000 square feet and 8 stores. And finally, do you think BBBY might be aggressive in their accounting, as perhaps they are overcapitalizing new store costs.?"

Their response was....

1. High Return on Capital. Working Capital is awesome. BBBY does not keep us up at night. The inventory is not perishable.

2. Buy Buy Baby – called them an “insular group.” Claims their insularity has been to the better. Sometimes BBBY runs as a private business. The founder of Buy Buy Baby comes from “good stock.” Potentially lots of upside, not much downside.

3. Says accounting for options and their backdating is an issue. Wasn't happy about that one. Other than that, they feel the business has been run conservatively over the years.

4. Claims aggressive accounting not a concern, since earnings and cash flow appear close.
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