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.