J. C. Penney Company, Inc. (JCP): Jim Simons' Largest Bet on Second Quarter

Renaissance Technologies is a hedge fund managed by Jim Simons, an American mathematician, hedge fund manager, and philanthropist. The fund tends to invest in all the sectors of the economy. In its recently filed Form 13F for the second quarter of the year, the fund disclosed 479 new stock positions, 1777 additional purchases, 924 trimmed bets and the closing of 416 of its preexisting stakes. The value of the equity portfolio decreased over the quarter, from $46.96 billion to $43.89 billion.

The fund's largest bet in the second quarter was placed on J. C. Penney Company, Inc. (JCP). Following a 249% increase in the firm's stake, Jim Simons disclosed ownership of 11,038,300 shares of the company, worth more than $93.49 billion, which account for roughly 3.6% of the total shares outstanding.

This stake situates Jim Simons as the major shareholder in the company.

The company posted a quarterly net loss of $138 million, or $0.45 per share, versus a loss of $172 million, or $0.56 per share, in the comparable period. Excluding items, the company's adjusted loss was $0.41 per share but beats estimates by $0.07. Its revenue was increased by 2.9% to $2.88 billion from $2.80 billion, also beating estimates by $20M. The numbers show that this is another solid (third) quarter and improved investor's confidence. However, others not so optimistic investors might think the stock will make better until investors are convinced that its strategy is moving the firm into robust sales gains.

"We are pleased to report another quarter of improved performance thanks to the commitment and diligence of the JCPenney team. Although we have significant work to do as a company to regain our status as a world-class retailer, I am pleased with the resilience and the efforts of our associates. I also remain confident in our ability to achieve the long-term financial targets we have laid out," Marvin Ellison, chief executive officer said about the quarter's performance.

The crucial question is whether it will be profitable next quarter, to better analyze if it can be attributable to fundamentals, so as to estimate more meaningful revenues that could sustain business growth and removes all doubts.

Last but not least, an important aspect to mention is the huge debt exposure the company has. When looking at the balance sheet, there is a $5.2 billion of long-term debt that might worry investors. This has a direct impact on the long-term debt-to-equity ratio, which is eight times higher than its peers.

Published on Aug 27, 2015
By Omar Venerio
Capital Markets, Derivatives and Financial Management Professor, Master in Finance and CFA candidate. I am an independent trader of stocks and options and passionate about the stock market.

Copyrighted 2016. Content published with author's permission.

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