Shares of J.C. Penney Company, Inc. (NYSE:JCP) are climbing in post-market trading this afternoon, as news just broke that CEO Ron Johnson is “out,” according to CNBC. This is intriguing because, on the whole, investors should be aware of an increase in hedge fund sentiment lately.
To most traders, hedge funds are viewed as slow, old investment vehicles of yesteryear. While there are more than 8000 funds trading at present, we hone in on the crème de la crème of this group, around 450 funds. It is estimated that this group has its hands on the majority of all hedge funds’ total asset base, and by tracking their best equity investments, we have brought to light a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 24 percentage points in 7 months (see the details here).
Just as integral, positive insider trading activity is another way to break down the stock market universe. Obviously, there are lots of stimuli for an insider to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Many empirical studies have demonstrated the market-beating potential of this tactic if shareholders understand what to do (learn more here).
Consequently, it’s important to take a peek at the latest action regarding J.C. Penney Company, Inc. (NYSE:JCP).
Hedge fund activity in J.C. Penney Company, Inc. (NYSE:JCP)
At year’s end, a total of 27 of the hedge funds we track held long positions in this stock, a change of 4% from the third quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully.
When looking at the hedgies we track, Bill Ackman’s Pershing Square had the biggest position in J.C. Penney Company, Inc. (NYSE:JCP), worth close to $770.2 million, accounting for 8.4% of its total 13F portfolio. The second largest stake is held by Larry Robbins of Glenview Capital, with a $143.9 million position; 2% of its 13F portfolio is allocated to the stock. Other peers that are bullish include William B. Gray’s Orbis Investment Management, and Robert Jaffe’s Force Capital.
As aggregate interest increased, some big names have been driving this bullishness. Pzena Investment Management, managed by Richard S. Pzena, assembled the most valuable position in J.C. Penney Company, Inc. (NYSE:JCP). Pzena Investment Management had 19.2 million invested in the company at the end of the quarter. Dmitry Balyasny’s Balyasny Asset Management also initiated a $4.1 million position during the quarter. The following funds were also among the new JCP investors: Phill Gross and Robert Atchinson’s Adage Capital Management, Daniel Arbess’s Xerion, and David Costen Haley’s HBK Investments.
How are insiders trading J.C. Penney Company, Inc. (NYSE:JCP)?
Insider buying is best served when the company we’re looking at has experienced transactions within the past half-year. Over the latest six-month time frame, J.C. Penney Company, Inc. (NYSE:JCP) has seen zero unique insiders buying, and 2 insider sales (see the details of insider trades here).
Let’s also review hedge fund and insider activity in other stocks similar to J.C. Penney Company, Inc. (NYSE:JCP). These stocks are Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS), Kohl’s Corporation (NYSE:KSS), Saks Inc (NYSE:SKS), Sears Holdings Corporation (NASDAQ:SHLD), and Dillard’s, Inc. (NYSE:DDS). All of these stocks are in the department stores industry and their market caps resemble JCP’s market cap.
| Company Name | # of Hedge Funds | # of Insiders Buying | # of Insiders Selling |
| Sears Hometown and Outlet Stores Inc (NASDAQ:SHOS) | 11 | 1 | 0 |
| Kohl’s Corporation (NYSE:KSS) | 35 | 1 | 5 |
| Saks Inc (NYSE:SKS) | 11 | 0 | 6 |
| Sears Holdings Corporation (NASDAQ:SHLD) | 17 | 2 | 2 |
| Dillard’s, Inc. (NYSE:DDS) | 19 | 1 | 3 |
With the results shown by Insider Monkey’s tactics, retail investors must always pay attention to hedge fund and insider trading activity, and J.C. Penney Company, Inc. (NYSE:JCP) is an important part of this process.
