JC Penney Shares Lifted as Hedge Funds Take Positions

Andrew Klips |

Shares of embattled retailer JC Penney Co. (JCP) are up in Friday morning trading, breaking through $9 each for the first time since October 1, as regulatory filings by hedge funds show several firms taking an interest in the company. 

Penney’s has been on topic of debate between bulls and bears over whether or not the iconic company can turn itself around or will go bust.  Several analyst firms have downgraded the company in recent months and activist investor Bill Ackman said in August that his Pershing Square Capital Management unloaded its entire stake (39 million shares) in the company.  Ackman’s hedge fund was JCP’s largest shareholder, owning about 18 percent of the company.  The sale came about two weeks after Ackman walked away from his position as a board member of Penneys.

Perry Capital, run by Richard Perry, one of the biggest JCP stakeholders after Ackman’s exit, cut position in Plano, Texas-based JCP from 12 million shares to 10 million shares during the third quarter.  Tiger Consumer Management washed-out completely, selling its 5.43 million shares.

Several hedge funds exiting or trimming holdings of JCP were disappointed when the company said in September that it was issuing 84 million shares to raise capital, diluting the stock by about 38 percent.  Ackman ally Steven Roth, chairman at Vornado Realty Trust (VNO) , also jumped ship, selling its 13.4 million shares.

As the adage goes, “one man’s junk is another man’s treasure” and recent 13F filings with the SEC for the third quarter show that several hedge funds do not agree with the move to dump the stock.

For starters, billionaire investor George Soros held his position at of nearly 20 million shares of JCP that he acquired in the second quarter shortly after then-CEO Ron Johnson was replaced by his predecessor Mike Ullman.

David Tepper of Appaloosa Management disclosed Thursday that the hedge fund purchased 737,800 shares of JCP valued at $6.5 million in the third quarter.

Jana Partners, headed by Barry Rosenstein, took a 500,000-share position in Q3.  Tom Steyer’s Farallon Capital Management matched the position with a half-a-million-share stake of its own.

Glenview Capital, run by Larry Robbins, bought 3.9 million shares, boosting its position to 12.4 million shares as of September 30.

Highfield Capital, run by Jonathon Jacobson, purchased 3.2 million shares of JCP during the quarter.

For some of these big funds, the money that they have them is a small drop in the bucket compared to the overall size of the money under management.  Still, though, with purchases made during the third quarter, most are underwater on the investment at the moment, even with the rebound from $6.24 per share that was hit late in October, meaning that going forward it will be interesting to see trade decisions by these funds.  Everyone knows that this is not an instant turnaround story, but investors of all sizes will be watching to see how the company performs during the holiday season to get a better feel for consumer sentiment towards the company.  There’s been a few times that most everyone thought Sears (SHLD) was dead in the water, but it keeps swinging back upward after stark declines.  Now the questions is if JCP can do the same.

Shares are ahead in Friday trading by 5.7 percent at $9.19 about halfway through the session.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
VNO Vornado Realty Trust 103.62 1.85 1.82 1,191,543
SHLD Sears Holdings Corporation 12.12 0.34 2.89 1,423,780
JCP J.C. Penney Company Inc. Holding Company 10.44 0.42 4.19 19,542,199
BCBF Beach Cmnty Bncshs Inc Fl 0.25 0.00 0.00 0

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