NEW YORK ( TheStreet) --Whitney Tilson riffed a solid line on CNBC the other day: When the story is the same and the price is lower -- buy more.
In a discussion of value, J.C. Penney and Netflix provide solid starting points.
I am in the process of completing a 180 on Netflix. In a recent article, I explain why Netflix can rise from the dead.The company's decision to build out its own network to handle its streaming video traffic could turn into a big deal. While it will take several years for Netflix to serve all of its own data (it keeps about 5% in house), down the road it could open up its pipes to other streamers. That's a ways off, but it shows Netflix will, most definitely, save money and potentially cultivate a new revenue source. Near-term, a quiet Reed Hastings and no major (and overpriced) content deal announcements tells me that if I am going to play this one from a value angle, it's best to go with a cautious long position rather than an aggressive short one. I think Netflix has a leaner and meaner self up its sleeve. Given my support of the company's controversial marketing decision, I would like to endorse a J.C. Penney long play. At this point, however, I just cannot do it. Ron Johnson did nothing short of botch his company's pricing strategy. But everybody knows that much. Now, as he backtracks, investors have even more to worry about. Johnson's solution to the misfire: Bring back the word "sale." That sums up the predicament he faces as the CEO of a department store. Everything in the retail toolbox has been recycled and tweaked thousands of times over. At some point, you have to stop pulling from that pathetic arsenal and make wholesale transformations to what it means to be a retailer. It's a tall order; and it's not a knock on Johnson to claim he's not up to it. Most people aren't. Keep in mind, when going cautiously bullish Netflix and remaining bearish J.C. Penney, I use a time horizon measured in years, not weeks and months. Simply put, there's a greater likelihood that Netflix produces some upside for shareholders in the next 12 to 18 months than J.C. Penney does.