JC Penny store

Whitney Tilson on why he is long J.C. Penney Company, Inc. (NYSE:JCP)

The stock of one of our largest positions, J.C. Penney, has fallen more than 20% since it announced ugly Q1 earnings: revenues down 20%, same store sales down 19%, severely negative free cash flow, and a suspension of the dividend. We expected a tough quarter, but not as bad as this one – and we weren’t alone, as analysts have raced to cut their estimates and skeptics are having their moment in the sun, trying to one-up each other with ever more heated doomsday predictions.
A company in our portfolio reporting disappointing earnings and its stock tumbling is nothing new to us, so we’re doing what we always do: tuning out the noise and short-term orientation of the market and carefully analyzing where the company is likely to be in 1-3 years. We’ve concluded that our investment thesis remains valid and that the stock’s intrinsic value is much higher than current levels, so we believe the recent selloff is a gift because we’ve been able to add to our position at more attractive prices.

Full document in scribd:

Why We’Re Long J.C. Penney-T2 Partners