J.C. Penney Company, Inc. (JCP)

JCP is a strong buy. Its trailing P/E is still below the industry standard despite a recent spike in share price. The PEG ratio is at 1.15, one of the lowest in the industry. JCP's debt to capital ratio is inline with industry norms, indicating a healthy balance sheet. All ratios and financial analysis aside, JCP is accelerating its growth plan to open even more stores than originally planned in the coming years. Most of these new stores will be off mall sites. This new trend in department stores meets the consumers desire to shop away from malls.

Oversold. Undervalued. Top investors like Carl Icahn & Warren Buffett like this company and believe they're buying the stock. Think insiders are buying as well. Need to do more research on this one. But going to buy this as a long-term hold.

JC Penney has gone from sad sack to happy jack in the last five years. For example, return on equity in 2002 was about 2%. It is now 25%. Net profit was less than 1/2 of one percent at that time and it is now over 5%. Furthermore, the shares outstanding have been reduced about 10% over this period. The average annual growth rate over the last five years has been about 39%. There is a lot to like. On the minus side of the ledger, please note that each dollar retained has been reduced to 60 cents, so they are clearly not masters of investment! Also, their debt load is way too high. Still, it appears to be a good place to park some money since it is currently bargain priced (as of feb 9 2007).

following TDRH on this one

I'm long JCP because I believe in management's story. I listened to the conference call and I know that they're going to meet all of their 2009 objectives in 2007. They're going to meet this spring to set new goals. I believe they will blow away expectations at the next report and I think they're going up 20 points in the next 6 months.

Similar to my argument against Macy's, JCP stock will fade with lower than expected sales and lower profits, while the S&P 500 will get supported by mutual fund managers beautifying their portfolios with the current winners. Therefore, JCP will fall relative to the S&P 500.

2/11/09 Pitch: Downthumb. Earnings 2/20/09. I wish I could upthumb this company as I have in the past. Pension headwinds. Also they have long-term leases that cannot be easily broken. Difficult to scale-back operations in this unprecedented recession. Headed for sub $10.
Past trades:
11/6/08 Pitch: Upthumb. Earnings 11/14/08 Excellent retailer with strong pricing power at the low end. Beaten down stock price. This is the time to buy retailers like this. Closed 12/9/08 @ $22.12 for +3.94 points.
8/7/08 Pitch: Upthumb. Earnings 8/15/08. Up into earnings based on their prediction of increased guidance. closed 8/15/08 @ $39.66 for +15.50 points.

Given the looming recession retail stocks have been hammered and will continue to suffer throughout most of 2008. However, one has to believe recovery is in the future and therefore I'm going with one of the old guards in retail. The stock is currently off 50% from its 12 month high but dividends continue to flow to shareholders. What's more they've recently release a new Ralph Lauren line of clothing that I expect will be successful. It's a contrarian pick, but I think down the road I'll be happy with the performance.

The way they are spending money on advertising and the statistics reported on benefits from advertising 3 media wise means this company should continue to make money on above average basis. Their past recent history has surely been great. Keep up the good work.

Consumer debt is at an all time high. Why? No more Mortgage Equity Withdraws (MEW). So what? Well consumer spending is based on how rich people feel. Last couple years during the housing boom, people have felt rich with home appreciation and home-ATM withdrawls (aka-refinance, MEW). Now that has tightened up so much it isn't even funny. So? Look at Mastercard. Heavy profits. Why? People are still spending BUT it is on credit cards now. So what? Well, in case you were unaware about credit cards, they are not infinite. They may keep the party dancing for 1-2 more songs but consumer spending will go down. That is not a prediction that is a fact based on economic reality.

Middle class retailer has good product mix, is bringing in more tweens and teens.

I walked into one today, for the first time since high school. Lame, Stale, Outdated.

the red ink is going to fly! Better invest instead in red ink company makers, this will be a disaster year for retailers.Sales figures dont mean much when your profit margins are negative...and even with all their discounts, their sales are off.Walmart is an exception but JCP,Sears, Target and Macys will take a barth! Expect MANY more bankruptcies in the retail group.

Recession, margins getting squeezed, debt and inventories accumulating.

When's the last time you shopped at JCP. The future is frugality and their margins suck.

Heading into deeper trouble

Just look at the JC Penny stock chart during the tech boom in the late 90s. People think they're rich, they buy crap at JCP that they don't need, people realize they're not rich, they stop buying useless crap.

Now compare to the stock chart now, and think: is there a bubble right now that supporting consumer spending? Duh, housing tanks and this stock tanks with it.

Jcpenny seems to be taking lessons from target- that's a good thing. Ralph Lauren is designing a line for them and they've begun advertising in high fashion publications. their customer base, like the rest of america, has become more fashion savvy without a necessarily correlating increase in income.

Currently trading at about 8.5 times earnings (lower than kohls, macys) and lower than the market. The sales and margins will improve after it opens new off the mall stores and add new product lines next year for cosmetics and apparel.