The Investing Lesson of J.C. Penney

NEW YORK ( TheStreet) -- The J.C. Penney ( JCP) saga continues, and it's not an uncommon story.

The old-time retailer where you grandparents probably shopped is trying to regain some of the relevancy it enjoyed during much of its 111-year history.

Unfortunately, that's a tall order. Just ask anyone you know how often he or she goes to the mall and visits the local Penney's. I'd be surprised if you get many responses in the affirmative.

It was just a couple of years ago that my brethren in the value crowd were touting the company as a must-own name.

That's when Ron Johnson, former Apple ( AAPL) retail wiz took over as CEO.

Based primarily on the belief that Johnson could single-handedly turn the company around, investors bid shares up from $24 in August of 2011 to about $43 by the following February. I called that gain the "Ron Johnson premium."

Johnson would not only make a great CEO, many said, but he was also a true believer, putting his money where his mouth was. In fact, Johnson coughed up $50 million to purchase 7.3 million 7 1/2-year J.C. Penney warrants that he had to hold for at least six years. The kicker was the strike price-$29.92. If Johnson was willing to take such a risk, many believed, in which he could lose $50 million if the stock did not perform well, that was good enough for them.

JCP Chart JCP data by YCharts

Of course, the story did not quite work out as planned. Same-store sales plummeted, and Johnson was gone by this past April. Now the hunt is on for a new CEO, one that can "really" turn the company around. The quest, of course, is being driven by Bill Ackman, whose firm is Penney's largest shareholder.

It was Ackman that had the value crowd so riled up about the company in the first place. To his credit, Ackman has been a wise investor in many cases over the years, but this one has been a debacle so far.

As a frequent attendee of the Value Investing Congress, I saw the presentations on J.C. Penney firsthand, and was enamored by the company's vast real estate holdings.

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