JCP: A simpler TARGET for Ackman.

The chain of events leading up to his 16.5% 13D this morning is rather sad. But not as sad as the lack of process behind managing risk around the margin squeeze that is yet to come as consumer spending and realized input costs converge. We’re throwing down the gauntlet.

 

 

Am I the only one sickened by the turn of events with JC Penney’s stock? The stock was up 70% -- yes SEVENTY percent – over the past month. There’s no doubt that JCP’s business was getting better on the margin. There’s also no doubt that someone knew that before others that play by the rules. Yesterday, when the comp was finally reported, the stock traded down roughly 5%, which clearly did not please anyone taking part in Wall Street GroupThink – or at least those that were unlucky enough to get the information so far down the line that they watched others capture all the alpha. So what happens next? Miraculously the stock staged a 15% intra-day turnaround, and near the close rumors became official that JCP was an LBO candidate. Amazing…

 

But then we got an extra kicker this morning only to find out that good ‘ol Billy Ackman has filed a 16.5% position in JCP – by far the largest active position in JCP.  

 

This is just sad in so many ways.

 

Maybe after going down in flames in the TGT proxy battle, Ackman has chosen a simpler target – one with management that is more easily influenced due to a less defendable model.

 

But all I have to ask you, Mr. Ackman, is one thing… Are you managing risk around the high potential for US Consumption to go negative by 6%+ in the upcoming 2 quarters at the same time that 80% of the goods JCP sells face 40% COGS inflation? I’m willing to bet that the answer is no.

 

Let's debate this one. I’ll do this with you anytime, anywhere and in front of any audience. Mano a mano, or better yet, my team vs. yours...if you dare.

 

Brian McGough

Hedgeye

 

JCP: A simpler TARGET for Ackman. - jcpba


Cartoon of the Day: 'Biggest Tax Cut Ever'

President Donald Trump's economic team unveiled what he called last week, "the biggest tax cut we’ve ever had.” Before you get too excited about that hang on a sec. "Trump Tax Reform ain’t gettin’ done anytime soon," Hedgeye CEO Keith McCullough wrote in today's Early Look.

read more

Neurofinance: The Psychology Behind When To Sell A Bull Market

"Most momentum investors stay invested too long, under-reacting and holding tight after truly bad news finally arrives to break the trend," writes MarketPsych's Richard Peterson.

read more

Energy Stocks: Time to Buy the Dip? | $XLE

What the heck is happening in the Energy sector (XLE)? Energy stocks have trailed the S&P 500 by a whopping 15% in 2017. Before you buy the dip, here's what you need to know.

read more

Cartoon of the Day: Hard-Headed Bears

How's this for "hard data"? So far, 107 of 497 S&P 500 companies have reported aggregate sales and earnings growth of 4.4% and 13.2% respectively.

read more

Premium insight

McCullough [Uncensored]: When People Say ‘Everyone is Bullish, That’s Bulls@#t’

“You wonder why the performance of the hedge fund indices is so horrendous,” says Hedgeye CEO Keith McCullough, “they’re all doing the same thing, after the market moves. You shouldn’t be paid for that.”

read more

SECTOR SPOTLIGHT Replay | Healthcare Analyst Tom Tobin Today at 2:30PM ET

Tune in to this edition of Sector Spotlight with Healthcare analyst Tom Tobin and Healthcare Policy analyst Emily Evans.

read more

Ouchy!! Wall Street Consensus Hit By Epic Short Squeeze

In the latest example of what not to do with your portfolio, we have Wall Street consensus positioning...

read more

Cartoon of the Day: Bulls Leading the People

Investors rejoiced as centrist Emmanuel Macron edged out far-right Marine Le Pen in France's election day voting. European equities were up as much as 4.7% on the news.

read more

McCullough: ‘This Crazy Stat Drives Stock Market Bears Nuts’

If you’re short the stock market today, and your boss asks why is the Nasdaq at an all-time high, here’s the only honest answer: So far, Nasdaq company earnings are up 46% year-over-year.

read more

Who's Right? The Stock Market or the Bond Market?

"As I see it, bonds look like they have further to fall, while stocks look tenuous at these levels," writes Peter Atwater, founder of Financial Insyghts.

read more

Poll of the Day: If You Could Have Lunch with One Fed Chair...

What do you think? Cast your vote. Let us know.

read more

Are Millennials Actually Lazy, Narcissists? An Interview with Neil Howe (Part 2)

An interview with Neil Howe on why Boomers and Xers get it all wrong.

read more