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I make no secret that with the incredible onslaught of ETFs and the addiction to passive money or index funds, the market often seems to misvalue individual equities. Recently, I've seen three different misvaluations, I want to talk about all three, about Kohl's, I want to talk about Nordstrom, I want to talk about Eli Lilly. We got involved with Nordstrom when we learned that the Nordstrom brothers wanted to take the company private, at the same time that they were about to open the men's side of the long-awaited in New York store. Knowing about their go private bid, thought to be at $50, we felt we had a good backstop, so when it went below $50, we got very aggressive. It then went hard before the quarter, and we sold some. Subsequently reported a subpar quarter, one that made it feel like it was more like Penny than Macy's, and the stock cratered from 51 to 45 in one session's time.

That made no sense to me, and I was unwilling to accept the vaunted market's judgment. The company had a rare and admitted failure to execute, and that caused the problem, it happens. We urged you to buy some with us, and we lowered our basis substantially. Literally three weeks later, and it is above 52 as if nothing happened. At $45, people panicked. We did not want to panic, and instead we bought their panic. It worked. Now we have the freedom to wait for the next quarter or take a nice profit right after this call. We chose to object the market's overly severe decree based on one quarter's suboptimal execution, and in retrospect that was the right thing to do.

Kohl's was very strange. The short position in the stock has been big for some time, still is, 16%, but the company has had the best same store sales numbers of the department stores. It has the best balance sheet in the group, but has never had to close a store, and has a solid yield backed up by plenty of cash, plus it has a tie in with Amazon that's pretty special. You can bring in something to return to Amazon, and Kohl's will ship it for you without it being boxed. The catch? You've got to walk through the store to get to the shipping section. It is producing great numbers for all the samples stores in the chain, and I expect it to be rolled out nationally in a very short period of time, it will cause another spike in same store sales.

Now Kohl's as a new CEO, and when the company reported it, there was confusion, as it looked like a blowout, but was actually in line, boosted by one-time special friends and family sale. Who knew they had so many friends and family? No matter, the stock shot up from 65 to 69 in pre-market trading when the the headlines came out, and then the shorts went nuts and hit it down to $60 during the conference call, which engendered a lot of panic. Again, we said the panickers were wrong. We said the market was wrong, and we said this had to be bought. Next stop, $78. The market was just plain wrong the whole way down. Now, I have to tell you, when you talk at the end of the call with Jeff Marks, who's a senior portfolio analyst, that it's time to take some calls off.

I wish it weren't that had just fallen, but you know what? We cannot be greedy here. You had to bet against the market. I know it's risky to bet against the market, could have looked very stupid, but we don't run the trust by how we might look. We run it by how the sum of our methodical preceded wisdom dictates.

In a market obsessed with passive money, traders just can't seem to get it right with Kohl's Corp. (KSS - Get Report) and Nordstrom Inc. (JWN - Get Report) , said Jim Cramer on the June Action Alerts PLUS members' call.

For Nordstrom, Wall Street started misfiring when the retailer reported a sub-par quarter that made it feel "more like J.C. Penney Co. (JCP - Get Report) than Macy's Inc. (M - Get Report) ," Cramer said. The stock cratered to $45 from nearly $51 in one session last month, said Cramer, who is the founder of TheStreet and the portfolio manager for AAP..

"That made no sense to me and I was unwilling to accept the vaunted market's judgment. The company had a rare, and admitted, failure to execute and that caused the problem," Cramer said. "At $45 people panicked. We did not want to panic and, instead, we bought their panic," Cramer continued. "It worked."

"We chose to reject the market's overly severe decree based on one quarter's sub-optimal execution and, in retrospect, that was the right thing to do," he said. 

As for Kohl's, Cramer said the market's perception was "very strange." About 16.5% of Kohl's stock is held in a short position.

"But the company has had the best same store sales numbers of the department stores, it has the best balance sheet in the group, it has never had to close a store and it has a solid yield backed up by plenty of cash," Cramer said.

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