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Going Against the Crowd

J.C. Penney (JCP) is the epitome of a struggling retailer. Just when you think it can't get any worse for the stock, it stumbles further.

Ron Johnson, hailed by many in the value investing crowd as the cure for the old-time retailer, was unsuccessful in his stint as chief executive officer, and same-store sales fell off a cliff. Then Bill Ackman, one of the stock's biggest proponents, threw in the towel, quit the board of directors, and sold his stake.

This morning, the company's secondary stock offering was priced at $9.65 per share, 7% below yesterday' s closing price, and a level the stock has not seen since 1986. Although the company is asset rich in terms of real estate, owning more than 400 store locations, I'm not sure the dust has settled yet on the stock. It remains on my watch list. JCP Chart JCP data by YCharts

The other is a much smaller name, toy company JAKKS Pacific (JAKK), which I wrote about in July.

At the time, the company had just reported a terrible quarter, and the share fell 40%. Since then, the stock has fallen another 33%. Analyst estimates are calling for a return to profitability in 2014, albeit a very small profit. While intrigued, I am not ready to pull the trigger on this one yet either. It's still a pretty messy situation, but one that bears watching. JAKK Chart JAKK data by YCharts

Both of these stocks could fall further; I am not yet convinced that the crowd has given up on either.

At the time of publication, the author was long Krispy Kreme and Gannett.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

At the time of publication, Heller was long XXXX.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

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