Should We Follow George Soros Into J.C. Penney Company, Inc. (JCP)?

At around $45 per share, Macy’s is worth $17.5 billion on the market. The market values Macy’s, Inc. (NYSE:M) at 2.8 times its book value and 6 times EV/EBITDA. J.C. Penney Company, Inc. (NYSE:JCP), at $15 per share, has a total market cap of around $3.3 billion. The market values the company at its book value. As it generated negative EBITDA, its EV/EBITDA is not valid.

Sears – also a liquidation and real estate play

Maybe George Soros, like Bill Ackman, has bet on J.C. Penney because of its real estate value. However, it could take a long time to realize. The similar case is of struggling retailer Sears Holdings Corporation (NASDAQ:SHLD) , headed by billionaire Eddie Lampert.

Sears also has quite valuable real estate assets. It has more than 250 million square feet of retail space, with 89% leased and 11% owned. Bruce Berkowitz, one of the most successful investment managers, is quite bullish on Sears as well. He currently owns around 17 million shares of the company, representing more than 13% of his total portfolio. His Fairholme Fund has become the second biggest shareholder of this struggling retailer after Eddie Lampert.

According to Berkowitz, Sears is trading at its inventory liquidation value. What makes him interested in Sears is its significant undervalued real estate. He pointed out that Sears had more real estate than Simon Property Group, Inc (NYSE:SPG), which was trading at ten times higher than Sears on the market. He thought Sears should be worth more than $160 per share. However, it is trading at $50.50 per share, with a total market cap of only nearly $5.4 billion.

My Foolish take

Indeed, it takes quite a long time to unlock the hidden real estate value in the retail operations. Otherwise, retailers have to spin off their real estate holdings into REITs. I personally think that investors could only consider Sears and J.C. Penney Company, Inc. (NYSE:JCP) as opportunistic stocks for their portfolios.

The article Should We Follow George Soros Into J.C. Penney? originally appeared on Fool.com.

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