A half decade ago, retailer J.C. Penney (JCP - Get Report) was one the most respected department store operators, and its shares moved above $80. By the time the company hired Apple (AAPL) veteran Ron Johnson in June 2011, the company had already lost its mojo, and shares had fallen to just $35. Johnson's first 19 months on the job have not gone as planned; shares still sit below $20.
Johnson aimed to revamp the retailer along the lines of Apple's strategy, creating a differentiated shopping environment characterized by many stores-within-a-store, all of which were aimed at replicating the enjoyable shopping experience at Apple's stores. He also wanted to get rid of all of the regular discounting that saps retailers' profits. That second move has backfired, and Penney has again begun to run merchandise-moving sales.
But it's the first effort -- the store-within-a-store concept -- that has a decent shot of working out. Penney's monthly sales results aren't yet surging, but consumer surveys reveal a keen interest in this new style of shopping experience.
It's not clear if this experiment will succeed, and it will surely take at least several more quarters to bear fruit. But if Johnson's plans do pan out, then shares are so undervalued in terms of price-to-sales metrics, that this could turn out to one of the best comeback plays of 2013.
Arkansas BestThe trucking industry has yet to fully recover from the deep economic slowdown of 2008, with both freight rates and volumes only slowly recovering. Indeed, most of the publicly traded trucking firms have seen their shares pummeled over the past five years, including Arkansas Best (ABFS), whose shares traded above $40 in 2008, were at $20 to start 2012, and now trade around $11. But an upturn appears to be in the offing. A 2012 EPS loss of 32 cents should be followed by a profit of 57 cents per share in 2013, according to consensus forecasts. Note that this is a company that routinely earned $2 to $3 a share in the middle of the last decade when freight volumes and pricing were more robust. Even if profits move up to the low end of that range, this is a very cheap stock.