J.C. Penney

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J.C. Penney ( JCP) is a stock in transition right now. The 110-year-old department store chain got investors excited when it announced that it had poached Apple's ( AAPL) retail head, Ron Johnson, but much of that excitement has dissipated since. Investors have notoriously little patience, and I guess the turnaround plan is taking longer than they're willing to take.

While JCP's short interest ratio is only 4.5, a staggering 41.5% of float is short right now.

Believe it or not, Penney has been making some big changes. From the new advertising initiatives designed to pull in a trendier, younger demographic to a new merchandising strategy behind the scenes, JCP is working hard to break out of the weak market position that it's found itself in over the last few years. By positioning itself as a place to find fashionable bargains, JCP's approach looks a lot like that of Target ( TGT), another of Ron Johnson's old haunts.

It's a good strategy, but it's one that's dependent on merchandising to pull off. That's why Johnson's expertise in merchandising should come in very handy.

While JCP's balance sheet isn't as pretty as the books are at the other two stocks we've looked at already, the firm's financials look a lot better than most of its peers. That wherewithal should give JCP the time it needs to complete its turnaround.

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