Boston, MA 01/15/2013 (wallstreetpr) – Many traders have made money on J.C. Penney Company, Inc. (NYSE:JCP) even as the company struggles to regain its footing in retail market. Those who have been happy playing this stock are the traders who played short. This strategy could still benefit those invested in the stock, however, it is important to announce from the onset that for long-term, JCP is radioactive.
While investors have learned to track hedge funds and insider trading to outperform their index-focused counterparts, such strategies have failed in J.C. Penney Company, Inc. (NYSE:JCP). Hedge funds led bullish sentiments in the stock by initiating huge positions. However, today there are very few hedge funds that still believe the retailer will get better any time in the near or medium terms.
J.C. Penney Company, Inc. (NYSE:JCP) also recently witnessed insider trading where by the CEO Mike Ullman put a significant amount of his money to buy the stock in open market. Such move was meant to tell investors that the company was progressing nicely.
However, recent developments leave no doubt that the company is still in quagmire. While J.C. Penney Company, Inc. (NYSE:JCP) announced same-store sales growth in October and November, the company refused to share with investors how it faired in December, a usually busy season for retailers. Lack of such critical data has led to conclusions that the company’s much hyped turnaround is losing momentum.
Playing JCP
Now that nothing good is coming out of JCP, how should investors play the stock? Unfortunately options are not many for those already invested in the stock other than selling position and waiting on the sidelines. This is what hedge funds that were once at the forefront of the company bullish sentiments are doing. Pershing Square Capital Management dumped its holding in the retailer, selling all its 39 million shares at $12.90.
Shorting a stock is not the game of many value investors, but as concerns JCP that is even expected to fall further; this could be the only way to mitigate losses.
Bottom line
That selling J.C. Penney Company, Inc. (NYSE:JCP) when the stock could still fetch around $6 per share is important. This is because stock dilution seems to be in the offing and as usual, this will erode the value of the stock even further as the management seeks to raise more money.
