Simply, JCPenney (NYSE: JCP) is a retail sector survivor, which is why I'm Reiterating my Buy rating for the company, first recommended on April 13, 2009 at a price of $26.52. If you bought JCP in April, you're up 30%.JCP has effectively aligned product quality/style with its target demographic, and also prudently and tactfully invested new brands. Meanwhile, effective inventory management and expense controls have aided the bottom line. Modest new store expansion plans for FY2010 and FY2011 are also consistent with a business model that's been able to survive amid the retail sector's rout.
Hence, as expected, institutional investors have been incrementally adding to their JCP positions since March. The First Call FY2010/FY2011 EPS estimates for JCP are $1.03 to $1.52. That FY2011 EPS estimate will likely to prove to be low.
Technically, JCPenney's stock chart is strong, with the stock recently clearing psychologically-significant resistance at $30. A recently pull-back to around $34 offers a preferable entry point/Buy opportunity.
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 one month, 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 December 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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