I’m really impressed as usual with Bill Ackman’s investment thesis with JC Penney (JCP). While there are few businesses I despise more than retail merchandising, the combination of real estate and cost savings leads to an obvious conclusion that the stock is undervalued. Ackman is a force to be reckoned with an he will hold management’s feet to the fire to meet the estimated $900 MM in cost savings initiatives. That alone makes the stock a buy. I’m less optimistic that Ron Johnson will have the same type of success he had with Target (TGT) and AAPL (AAPL) due to the horribly competitive industry that JC Penney is in. Today we sold some 2013 and 2014 puts on JC Penney to take advantage of the significant volatility in the stock. I’d love an opportunity to buy their bonds at a 10% + yield to maturity but currently the yields aren’t close to that.
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