As a value investor, I am always on the lookout for companies that have been beaten down by the markets, more than they deserve. When everyone else is selling, when the crowd has given up, I may become interested, especially if there are company owned assets whose value is not being recognized. In the case of JC Penney, there are significant real estate assets, including 429 owned retail locations, and 18 warehouses, distribution and fulfillment centers, but there's also $5.8 billion in debt. That level of debt, especially for a company in decline is of great concern, and it casts a shadow on the real estate assets. I also can't get too excited at this point that the company trades well below tangible book value.
JCP Price / Tangible Book Value data by YCharts
I am not interested in JC Penney at these levels; there is not a significant enough margin of safety, and shares could certainly fall further. Sales have not yet stabilized, and unlike the market, I can't get excited over the recent September same store sales down 4%. Still looks like a falling knife, at this point, anyway.
JC Penney needs to truly break with the old; that's the company's only shot, in my view.
At the time of publication the author held no positions in any of the stocks mentioned.Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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