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James Li
James Li
Articles (562)  | Author's Website |

David Einhorn Starts Position in Distressed J.C. Penney in 4th Quarter

Guru announces top buys from latest portfolio filing

February 15, 2018 | About:

David Einhorn (Trades, Portfolio), president of Greenlight Capital, disclosed Wednesday he established 19 positions during fourth-quarter 2017. His top six buys included a position in J.C. Penney Co. Inc. (NYSE:JCP), a moderately financially distressed retail company.

Einhorn invested in 6,397,990 shares of J.C. Penney for an average price of $3.22. The investor increased his portfolio 0.37% with this transaction.

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Company announces eight store closings for the year

According to CNBC, J.C. Penney announced that in order to ensure the company’s locations “offer the best expression” of the brand and function as a “seamless extension of [the company’s] omnichannel experience,” the retailer decided to close eight stores across the U.S. in fiscal 2018. Cities where J.C. Penney is closing stores include the following:

  • St. Louis, Missouri
  • Paramus, New Jersey
  • Burlington, Washington
  • Mt. Vernon, Ohio

Company still has poor financial strength despite reporting good holiday comp sales

Although the company’s comparable sales for the nine-week period ending Dec. 30 increased 3.4% over the same period in the prior year, J.C. Penney still has moderate financial distress. The company’s debt-to-equity ratio of 4.17 ranks lower than 97% of global competitors. Additionally, J.C. Penney’s debt-to-EBITDA ratio of 6.28 is significantly higher than Joel Tillinghast’s safe threshold of 4, suggesting increased difficulty of paying off debt.

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J.C. Penney’s Altman Z-score of 1.34 implies possible bankruptcy within the next 48 months.

A summary of guru’s top buys

Einhorn’s top six buys based on portfolio impact are CONSOL Coal Resources LP (NYSE:CCR), Twitter Inc. (NYSE:TWTR), Time Warner Inc. (NYSE:TWX), Ensco PLC (NYSE:ESV), The Medicines Co. (NASDAQ:MDCO) and JC Penney.

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You can view Einhorn’s latest trades here.

Disclosure: I do not have positions in the stocks mentioned.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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