I'm Reiterating my Buy rating for JCPenney (NYSE: JCP), first recommended on April 13, 2009 at a price of $26.52.
As expected, institutional investors are incrementally adding to their JCP position, on sentiment that JCPenney will capture some of the trade-down segment. These are middle-income and occasionally upper-middle-income adults who, for budget reasons, are steering clear of the designer boutiques and high-end retailers: they'll be buying only what the need, and chances are JCPenney will see some of that business.
In other words, in the era of the "frugal consumer" that's created tough times for retailers, JCP will be a survivor. The First Call FY2009/FY2010 EPS estimates for JCP are 87 cents to $1.33.
Further, with a P/E of 16, this could be your last chance to take a position in JCP and earn an out-sized gain.
Stock Analysis: JCPenney is a moderate-risk stock. If you've already purchased the company's shares, hold them. If not, consider buying a 50% position in JCP now; then buy another 25% in three months, if U.S. and global economic conditions don't worsen substantially. Under any circumstance, don't buy more than 75% of your JCP position before October 2009. Sell/Stop Loss if you were to buy shares in this company: $12.
Disclosure: Lazzaro has no positions in stocks, but does own shares in two Pimco Bond Funds: PHDAX and PYMAX.
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