Bill Ackman Likes JCP as Ultimate Contrarian Investment [UPDATED]

Bill Ackman Likes JCP as Ultimate Contrarian Investment [UPDATED]

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.

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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!