We have long considered investor Bill Ackman’s investment in JCPenney (JCP) a bad trade to say the least. Going against Ackman and shorting JCP is a trade worth considering, but not at these levels. Currently, JCP is the only retailer that has a Sentiment Score below 10 (on a scale of 100). This extremely bearish sentiment is all the more reason why you shouldn’t short JCP when it’s in the teens - it’s a bullish signal. But those who want to get long JCP are really putting their faith in CEO Ron Johnson flawlessly executing on his 2013 game plan. That’s a Hail Mary if we ever saw one.
The complete transformation of JCP stores is going to take some time and in turn, the company will likely miss near-term targets in favor of long-term results that work. Make no mistake about it: Johnson is in this for the long haul, especially with his stock warrants being worthless while the stock is below $29 a share. While it seems easy to short JCP, you won’t want to do it with the stock trading in the high-teens unless you're making 'the bankruptcy call'. That might come to fruition, but not in 2013.