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After JCP 'Ackfires' - George Soros Buys Big

April 26, 2013 | About:

Sally Jones

49 followers
Radical Faith?

Let’s face it, this trade took courage. Titan investor George Soros is making a social proclamation of faith not only in the J.C. Penney Company (JCP) but by extension, America, and the way things were and could be. After all, J.C. Penney stores have come to own a level of intangible goodwill in the American psyche, reflecting back a social ethos of a very democratic American Dream.

Today’s mega-buy makes George Soros the fourth largest stakeholder in J.C. Penney Company Inc. (JCP) with a 7.9%1 stake in the deeply down department store chain. J.C. Penney’s top stakeholder is William Ackman's Pershing Square Capital Management, with a 17.8% stake and the major embarrassment of his recent J.C. Penney vision gone wrong.

Guru George Soros of Soros Fund Management bought 17,386,361 shares of JCP, as of April 15, 2013. His price range was $14.39 per share. This new holding impacts his portfolio by 4.94%. JCP is down 58% over 12 months but suddenly spiked 7% to $16.13 today after the news announcement.

Bill Ackman’s Pershing Square Capital Management owns 39.1 million JCP shares of the ailing company. About two years ago, it was Ackman’s master plan to push out then-CEO Myron “Mike” Ullman and replace him with Ron Johnson of Apple Inc. fame. The vision was to save J.C. Penney by refocusing the retailer with name-brand clothes at lower prices, with no promotional coupons. The company soon discovered that customers wanted to play the coupon game instead of “everyday low-low prices.” As a result sales fell faster, and Ackman’s choice executive was fired after being CEO for only 17 months.

The company’s turmoil produced a revolving door effect that whirled former and now-current CEO Myron “Mike” Ullman back in, much to the chagrin of Ackman. After the firing of his choice Johnson, it was obvious that Guru Ackman’s plan had “Ackfired.”

Stuckola?

Unless J.C. Penney Company Inc. has huge real estate assets like Sears, it appears that Ackman is left holding the bag of 39 million shares of a possibly washed up company run by the “frenemy” CEO he had pushed out to hire Ron Johnson.

Ackman’s holding history shows a losing streak since he first bought JCP for 15 million shares in third quarter of 2010. As of the end of 2012, his average cost of shares for 39,075,771 shares was $29 per share with a 47% loss.



Here’s a look at JCP’s Net Income:



J.C. Penney insider trading shows that CEO Ullman’s 27,000 shares are off by 60.16% since he traded in 2008.



Various sources say that the company is talking with banks on how to raise funds and turn the company around, yet again.

Drama Kings

We’ve all heard of drama queens, but among top hedge fund managers, there are drama kings, too, like George Soros and Bill Ackman whose ethereal billionaire playing field is just as rough as everyone else’s, maybe rougher. The hedge fund drama kings know the art of sending non-verbal messages, but who can really name the cause or the motive of Guru actions with any accuracy?

With Ackman in the spotlight of so much controversy, Soros has begun to pull money out of Ackman’s fund. Only the guru knows if Soros’ recent moves are related to Ackman’s bets on his own JCP misadventure or the heated Herbalife (HLF) strife, but Soros Fund Management has been withdrawing “several hundred million dollars from Bill Ackman’s $12.5 billion Pershing Square Capital Management” over the past few months, according to the Wall Street Journal.

Higher Ground

In January 2013, billionaire George Soros spoke to CNN about his outlook for the global economy. Soros also discussed his views on what is needed to put the U.S. economy on the higher growth path, and said “…The U.S. outlook is best among all the major economies today.”

With this recent trade, George Soros stands at the crossroads where business intersects with heart, where investing intersects with believing in the Great Invisible. This is where a true Guru shines because he represents the collective and he bets on the dream. After all, the giant department stores that we grew up with were places of magic.

What will become of the emblematic J.C. Penney stores in the Internet Age?

Only the guru knows.

For now, billionaires, belly up to the bar and decide the future of where and how we shop.

George Soros of the Soros Fund Management has a portfolio of 179 stocks with a total value of $8.36 billion, and a quarter-by-quarter turnover of 19%.

George Soros top buys, sells and holdings,



Here is the complete portfolio of George Soros.

Also check out:

1. George Soros's Undervalued Stocks

2. George Soros's Top Growth Companies

3. George Soros's High Yield stocks

4. Stocks that George Soros keeps buying

About the author:

Sally Jones
Sally Jones writes about Real Time Picks. She says, "I truly enjoy watching the Gurus in realtime and telling their story."

Rating: 3.2/5 (13 votes)

Comments

tbare06
Tbare06 - 1 year ago
I purchased a small position in JCP last week. Nice to know that Soros was buying at the same time. To me, the bet here is that the customer will return. I think the answer is yes. I used to shop at JCP myself (mostly for suits, dress shirts, etc.). The coupons stopped coming and I found myself not going there. Then, a few weeks ago a coupon showed up in the mail and I found myself picking up a new pair of running shoes within a week.

Before the news of Soros, the company was selling for about book value and I believe .25 of sales. If the company does nothing else but stabilize its sales and return to the low end of its average long-term net margins, the stock should trade up to the mid-twenties. On the other side, perhaps the brand is dead (though that's not the sentiment I gained from a very unscientific survey I did of the important women in my life). Of course, online retailers pose a threat too.

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