J.C. Penney Company, Inc. (NYSE:JCP) jumped as high as $9.11 per share in the morning or 4.35% from its closing price of $8.73 per share yesterday as ITG Research raised its revenue forecast on the company’s second quarter to $2.95 billion from $2.9 billion. This outlook is also more than the consensus of $2.86 billion. The retailer’s same-store sales forecast is an increase of 5% to 7% year-over-year, according to ITG Research, compared to the consensus of an increase of 4%. Furthermore, the stock was given a rating upgrade from investment analysts at Vetr. In a note to clients on Monday, the firm upgraded the retailer’s stock to a “Buy” from a “Hold”. Vetr’s price target on the stock is $8.77. The last update on the stock’s rating came from Piper Jaffray on June 25 which reiterated an “Overweight” rating. Year-to-date, the stock has climbed 38.24% while over the last year, making up for the majority of its losses in the second half of 2014; it has still declined 1.54% over the past 12 months.
This positive performance of the company’s stock within 2015 echoes the increased interest hedge funds tracked by Insider Monkey had in the company by the end of the first quarter. At the end of March, a total of 29 of the hedge funds we track were bullish in this stock, a 12% increase from the close of the fourth quarter. More importantly, total holdings increased in value by 50.11% from the end of the fourth quarter to the end of the first quarter. On March 31, the hedge funds tracked by Insider Monkey owned $175.24 million in J.C. Penney shares, up from $116.74 million in the prior quarter. The stock jumped only 29.78% from January 2 to March 31.
General opinion is that hedge funds underperform the S&P 500 based on net returns. But we are missing something very important here. Hedge funds generally pull in strong returns from their top small-cap stocks and invest a lot of their resources into analyzing these stocks. They simply don’t take large enough positions in them relative to their portfolios to generate strong overall returns because their large-cap picks underperform the market. We share the top 15 small-cap stocks favored by the best hedge fund managers every quarter and this strategy has managed to outperform the S&P 500 every year since it was launched in August 2012, returning over 135% and beating the market by more than 80 percentage points (read the details). Because of this, we know that collective hedge fund sentiment is extremely telling and valuable.
Insider Monkey also tracks insider trading to monitor whether insiders are selling or purchasing their firm’s shares. J.C. Penney insiders did not make any purchases within 2015 but Executive Vice President for Human Resources, Brynn Evanson, had sold 6,761 shares by mid-May.
Taking all of this into consideration, let’s go over the key action encompassing J.C. Penney Company, Inc.
What does the smart money think about J.C. Penney Company, Inc. (NYSE:JCP)?
Of the funds tracked by Insider Monkey, Renaissance Technologies, managed by Jim Simons, holds the largest position in J.C. Penney Company, Inc. (NYSE:JCP). Renaissance Technologies has a $26.6 million position in the stock held in 3.16 million shares, comprising 0.1% of its 13F portfolio. The second-most bullish hedge fund manager is Citadel Investment Group, managed by Ken Griffin, which held a $17.9 million position held in 2.12 million shares of the retailer; the fund has less than 0.1% of its 13F portfolio invested in the stock. Remaining peers with similar optimism encompass Chuck Royce’s Royce & Associates, and Mike Masters’ Masters Capital Management.
As one would reasonably expect, key money managers were breaking ground themselves. It should be noted that Citadel created the largest position in J.C. Penney Company, Inc. (NYSE:JCP) during the first quarter with its aforementioned $17.9 million holding. Mike Masters’ Masters Capital Management also made a $12.6 million investment in the stock during the quarter, holding call options underlying 1.5 million shares. The following funds were also among the new JC Penney investors: Alexander Mitchell’s Scopus Asset Management, Joel Greenblatt’s Gotham Asset Management, and Jody LaNasa and Vivian Lau’s Serengeti Asset Management.
Because of the increase in interest from hedge funds and the positive ratings from analysts, it appears J.C. Penney Company, Inc. (NYSE:JCP) is a good stock to buy at the moment.
Disclosure: None
