J.C. Penney (JCP) shares are up 18% this year, despite extreme negative sentiment in the stock including over a third of the shares being sold short. Chris Terry, senior equity analyst for the Hodges Small Cap Fund (HDPSX), said the short-sellers could be in for even more trouble. 'If things go well and they execute well we think ultimately they get to $2 a share of earnings power, to us that takes the stock from $7 to $20 a share over the next few years,' said Terry. The Hodges Small Cap Fund is down 12% thus far in 2016, according to fund-tracker Morningstar. The $1.4 billion fund sports has returned an average of 7.8% annually over the past five years, outpacing 91% of its Morningstar peers. Terry is also bullish on American Eagle (AEO), which has seen its shares have drop around 8% so far in 2016. He said the heavily shorted teen retailer has tremendous turnaround potential. Inventories at the company are in good shape, in his view, and margins are moving in the right direction.
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