The Daily Dose: Stay Long J.C. Penney

 | Aug 29, 2014 | 9:00 AM EDT
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What a week. S&P 500 closing above 2000 for the first time. Policymakers across the pond virtually promising easy money for as far as the eye could see, bolstering the market's mood.  All of the euphoria in front of a jobs report that could easily be above consensus. For me personally, it has been a week of "secret" meetings, both via email and in-person, in which I have learned so many thought-provoking things, it's mind-boggling.

  1. I think you are going to bear witness to some product innovation from Best Buy (BBY) before the holiday season that has nothing to do with Apple (AAPL). Moreover, one shouldn't expect a Macy's (M), Sears (SHLD), or J.C. Penney (JCP)-type store closing plan from the company in early 2015. Unfortunately, that's all I am able to share on Best Buy.
  2. What I do find interesting is the recovery in retail stocks after reporting what initially was perceived as weak second quarters and outlooks for the remainder of the year.  Best Buy recovered post-earnings. J.C. Penney shares are up 15% since its August 14 loss per share report. Abercrombie & Fitch (ANF) shares bounced a little bit after a dreadful quarter in terms of sales, which questions the pace of turnaround at the teen apparel retailer. Now, if those actions aren't the result of Fed liquidity injections, I am not sure what else is! By the way, I am also amazed by how much senior executives are watching their stock prices, something I haven't detected in some months. Hello, exuberant market top?
  3. Countless people, from pundits to stock analysts to money managers, are under-estimating in my view long it will take to roll out same-day delivery programs for retailers and tech companies. Seeing a flying drone from Amazon (AMZN) certainly sparks the imagination, but there is a serious amount of fundamental planning that has to happen behind the scenes before even company X uses a FedEx (FDX) to promise delivery of a package in two hours.
  4. I remain saddened by how many companies have not invested resources in social media teams. Frankly, it's disturbing. Not only do companies need heads of social media, but they need people under these execs to help carry out the mission statement in real-time and protect the brand against complaints. Those complaints come in the form of 90-word musings or pictures, which could get retweeted, go viral, and destroy a brand's quarter or long-term outlook. The power of social media is intense, and it has to be respected by executives.

Have a wonderful long holiday weekend. Oh yeah, if you are long J.C. Penney, keep with the position into the company's October 8 analyst day in NYC. I suspect the company could upwardly revise its third-quarter guidance on the day, with the wildcard being the announcement of a permanent CEO to replace Mike Ullman (who just underwent surgery). 

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