J.C.Penney: Limited Stock Float Adds to the Wild Ride

Recent S.E.C. filings show several respected institutions have taken a major position in J.C.Penney stock in the recent past.  A clear vote in support of CEO Ron Johnson’s strategy. Adding it all up, 76% of the shares are accounted for by long-term oriented institutions leaving only 24% in effective float.  Typically, a small float causes stocks to fluctuate more when news is disseminated.
 
Here are the facts:
Date Reported    Institution         Number of Shares         % of Outstanding
Oct 9, 2012         Vornado                23,400,000                 10.7%
Jan 3, 2013         Pershing Square   39,075,771                 17.8
Jan 30, 2013       Black Rock              14,568,513                6.65
Feb 12, 2013      Evercore Trust        11,699,816                5.34
Feb 12, 2013      State St. Corp.        17,909,178                8.26
Feb 13, 2013      Dodge & Cox          20,225,200                9.2
Feb 13, 2013      J.C.Penney              11,699,816                5.3
Feb 14, 2013      Hotchkiss &Viloy   13,877,917                6.33
Feb 14, 2013      Wellington Mgt      13,954,793               6.36
Total                                                169,412,010                 75.94
One must note that the Vornado, Pershing Square and J.C.Penney filings are internal, since Vornado (Steven Ross) and Pershing Square (William Ackman) bought shares over a year and a half ago in an activist campaign that led to multiple seats on the Board.  The J.C.Penney filing may be for year-end employee stock awards. However, the recent purchase by some of the most respected and largest U.S. financial institutions causes one to wonder what information led to their decisions. Are sales and earnings better than expected and is management expressing optimism in private one-on-one meetings with these institutions that the investing public is not aware of?  Are the investors less concerned with the short-term results and looking more at the long term rebirth of the company?  From the vantage point of small and mid-sized investors who have no way to be protected if one of these intuitions starts to sell their holdings, what these large institutions know that they don’t is troublesome.

From my vantage point, I see a big effort at J.C.Penney to bring back the customer who is now shopping at other venues. The fall and winter merchandise is marked down and customers are buying the clearance merchandise. More emphasis is now being placed on value promotions and I hope that fewer shops will be opened this year, since I believe that some of the brand names planning to open shops are irrelevant to a value oriented consumer.

The company will report the annual results for fiscal 2012 at 4.30 pm on February 27, 2013. I can hardly wait to hear exactly what happened in the fourth quarter of 2012 and how management plans to move forward in 2013 on a sales base that is likely to be at least $4 billion lower than it was in 2011.