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A Tale of Three Turnaround Stocks

Among BBY, HPQ and JCP, which has a real future?

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YTD return: -27%
One-year return: -48%

J.C. Penney (NYSE:JCP)Ding, dong the witch is dead! Pay no attention to those dismal share price numbers, all that matters is that Bill Ackman and his Pershing Square Capital’s 18% stake in JCPenney (JCP) is gone.

It’s a tale of woe: Ackman brought in Apple (AAPL) retailing savant Ron Johnson, who tried to transform the JCP model and instead just totally pissed off its loyal customer base, spent a boatload of money, and left the company virtually for dead. Oh, and as payback Ackman lost nearly  $500 million on that stake.

Perhaps now management, in the form of returning CEO Mike Ullman, can make some headway and undo the damage wrought by Ackman. Where to start? Ullman will need to placate that old customer base and get them back in the stores with what brought them in in the first place — discounts!

He’ll also have to get new customers into the stores, and merchandise will be key. Ullman started working on that by dumping the disappointing Martha Stewart line, although how he is going to transition Johnson’s store-within-a-store model back into the old JCP is beyond me.

But hey, someone out there likes the story: hedge fund managers including Larry Robbins at Glenview Capital and Kyle Bass of Hayman Capital have piled into the stock, helping to spur a recent 8% run over the past month.

Sorry — like Louis Navellier, I’m still not buying this one. I’m not really sure what the pros see in this, but all I see are significant balance sheet and cashflow issues that won’t be resolved any time soon.

Marc Bastow is an Assistant Editor at As of this writing he is long AAPL and MSFT.

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