I note with fascination a particular hedge fund investor’s large stake in JC Penney (NYSE: JCP) and them talking up their book massively in their past quarterly report.
First of all, talking up your book is a sign that you don’t want to accumulate any more position – why tell the whole world your investing thesis before you can capitalize fully on it? I follow a similar policy on this site – there are quite a few names I haven’t mentioned until after the point where I simply won’t accumulate any more of a position.
I took a look at JCP for interest sake, simply because I generally do not like investing in S&P 500 components and also I do not like retail companies – it should be perfectly evident to anybody that unless if the retailer is about branding opposed to product (examples: Abercrombie and Fitch, Coach, Limited Brands/Victoria’s Secret, etc.), they will continue to be exterminated by the likes of Walmart, Target and Amazon. JC Penney is in the “extermination” category. This is doubly so with their new “every-day pricing” strategy, which a high school student can figure out will put it at odds against Walmart and Target.
I also note that they brought in some high-profile management formerly from Apple last year to try to turn the operation around, but in my unprofessional estimation, there isn’t a heck of a lot they can do with the hand of cards they were dealt.
My own simplistic view of the retail world also doesn’t explain how companies like Pier 1 Imports (NYSE: PIR) actually manages to exist, but I’ll let smarter people out there explain that one. My sour grapes with Pier 1 was that I was doing some on-the-ground research on the company about 5 years ago and told myself after walking in one of their stores “Who buys this over-priced crap?”. I note that if you put in a big order to buy shares of them during the February-March 2009 economic crisis (which reached a low of $0.10 per share) that you would be a very, very rich person today. So answering my question, apparently plenty of people do buy their over-priced crap.
This leads to my final point when it comes to retail investing: Never assume your own consumer preferences are those of others.