Home » Black Swans » The Insanity of JC Penney. Reasons to invest or lose money. The Art of Buy Ugly Sell Pretty $JCP

The Insanity of JC Penney. Reasons to invest or lose money. The Art of Buy Ugly Sell Pretty $JCP

Everyone by now is familiar with the tale of woe called JC Penney (NYSE:JCP). The iconic all American Merchant has a fundamental problem. It cannot find a way to take money out of the American Consumer’s pocket. Problems in the executive suite are well publicized. Strategic activist investor who helped create some executive suite problems proved he had more money than retail savvy.

Financial media, blogs and twitter streams are alive with shrill comments. Management didn’t help by saying they really did not need to issue the new stock and dilute long-suffering shareholders. Confirms that management does not understand the investing public which may be a worse problem than an inability to select saleable merchandise.

So do you stay or do you go. So take a few steps back and get some perspective. Assuming the current political stupidities in Washington are somehow resolved or kicked down the road ponder the following points.

  1. Why own legacy department store retail?
  2. Walk through a few stores and see what the merchandise is doing?
  3. Everyone is worried about Christmas. Christmas is over. The decisions have been made. The dice have been cast. They’re working on Spring.
  4. Watch the Black Friday super sales. JC Penney can track their numbers by the hour. Back to school sales are mostly over. Changing seasons is kicking in. Halloween is always a little bit of a booster shot but does not make the year. By the end of Nov management should know how the Christmas strategies are working out. If they discount like crazy they’re in trouble.
  5. This may be the classic deep value investment play. Buy ugly sell pretty. Right now it’s ugly; but is it ugly enough.
  6. Investors will be selling soon if you see some capitulation. Lock in the tax loss and revisit soon after. The price may go down to where it becomes an option without an expiration price. There is more downside pressure and I suspect the price will continue to drop. JCP will soon be too unstable for margin causing more downward pressure.

George Gutowski writes from a caveat emptor perspective. Read my next blog post for the secret tell that screams buy JC Penney