It’s tough to be bearish on some of these speculative growth names in an environment where shorts are getting squeezed, but Herb is the best in the business when it comes to flagging bad actors, so I had to ask him...
“What do you know about this BigBear.AI?”
And I don’t want to say too much, but I will tell you that he shook his head and laughed at the question.
Here’s why I asked…
I currently have an 8x overweight position in BBAI stock—as well as a handful of call options and warrants—so I’m interested.
The position is starting to work nicely, as the coil resolved today, sending the stock soaring, up 25%.
So, I’m thinking to myself… like I often do… maybe this is more than a trade. Maybe this is something I want to hold longer term..?
As it turns out, it’s not.
Here are some things I do not believe about BBAI:
I do not believe their aggressive revenue guidance. The top-line is barely growing.
I do not believe the $385M revenue backlog figure at all. The company says 98% of it will be recognized in the coming 12 months, however, only $20M of it is funded, or contractually committed.
I do not believe this company warrants comparisons to Palantir. There is only one Palantir, and it ain’t them.
I do not believe their CFO just stepped down “to pursue other opportunities” because her LinkedIn still has her working at BigBearAI. There was no advance notice, the transition was effective immediately when announced, and they promoted the next guy in line.
None of this smells remotely good to me. But it also doesn’t really matter if I’m just trading the stock.
Now, here are some things I do believe about BBAI:
I believe it is the perfect story-stock for the current environment. Government contracting meets AI! Drawing comparisons to PLTR! It doesn’t get much better.
I believe there is a massive short interest, and a squeeze is just getting underway.
I believe this is a textbook coil within the context of a structural base… which is one of those patterns that just keeps working in the current market.
I believe the stock is coming off several months of volatility compression, and from compression comes expansion.
I believe once the animal spirits are through with this one, I can sell it for a lot higher than what I paid for it.
And these are the things that do matter for the bet I’m making on this stock.
I do not care if this company ends up being a giant fraud… and to be clear, I’m not suggesting it is.
But none of the fundamental stuff is really relevant in light of my short-term objectives.
I loaded up into the coil in anticipation of an upside resolution. Now I plan to ride this reaction rally for as much as I can get. And I’ll be taking profits along the way.
In fact, I took some today. I bought some August calls with Breakout Multiplier members yesterday and sold half for a double on today’s move. We are now 3-for-3 when it comes to booking free rides on this stock.
