Bill Ackman is the CEO of Pershing Square Capital, a value oriented hedge fund with over $11 billion under management.
The slide is titled Think Big.
Should You Go All In On Water Like Michael Burry?
Water investments? Michael Burry was one of the first institutional investors to bet against the US subprime mortgage market in the mid-2000s, and today he’s concentrating all of his investment efforts on one commodity: water. Burry’s focus on water has attracted plenty of attention to the commodity in the investment community but trying to profit Read More
Best investment ideas are contrarian. The most contrarian investment is to buy a company right before bankruptcy like General Growth Properties Inc (NYSE:GGP). The most contrarian short investment is MBIA Inc. (NYSE:MBIA), buying the CDSs
The most contrarian idea is down 20% today; J.C. Penney Company, Inc. (NYSE:JCP)
JCP owns a lot of valuable real estate. Most JC Penny’s are located in upscale malls, with 80% for $300 sq meter or more.
6:02: The company almost declared bankruptcy in the late 1990s. In the late 2000’s the CEO tried to turn things around by selling off some assets.
6:03: Ackman bought at $26 a share, which investors can buy it at today.
6:04: The brand is well known the internet business is also well known.
6:05: We found the person with the best track record in the world, and we found Ron Johnson who ran Apple Inc. (NASDAQ:AAPL) stores. He saw JCP as the best opportunity in retail.
6:06: He has recruited the kings of retail, with some executives from Home Depot, Target, Gap etc.
6:07: Sales are low and expenses are too high!
6:08: JCP pricing strategy has changed. The discounts were too promotional and was bad to attract high quality brands.
6:09: Stores were not well stocked, the advertisements were too promotional and flashy. They were missing their target customer
6:10: Ron Johnson is changhing everything. Not promotional, every day prices, reduce labor hours, free merchants to focus on product not promotional goods.
6:11: JCP is now getting a new brand. Even the logo has been changed. This will now look like a ‘mall within a mall.’
6:13: The sales went down as expected as we switch over. The first quarter results were slightly lower than street estimates.
6:15: The company is starting to eliminate costs, which the magnitude of which are huge. CNBC said today you cant grow revenue by lowering cost, but you can increase revenue.
6:17: The Gap Inc. (NYSE:GPS) has much more expensive real estate. He got rid of a lot of costs, but brought 60 fold return to shareholders. We are different but think we can provide a good return.
6:20: investors must realize that Ron Johnson has only been on the job for three months. Getting back to 2007 earnings, the company could make $6 a share or more, which is 4x earnings. Intrinsic value is likely close to $72.
6:21: The new JCP is not making to look a 3x return. We think we can get a much higher share price.
6:23: If JCP gets to a real mall of malls it could be worth up to $315 a share!