Saturday, September 17, 2011

William Ackman On Pershing Square's Fascination with JCPenney

I caught Pershing Square hedge fund manger William Ackman on CNBC last week extolling JC Penney, of which his fund has become a major owner.

Perhaps it's only me, but I found him to be somewhat delusional, going on about Penney's real estate values and locations, a 'jeans bar' to be like an Apple store's 'genius bar,' and his seeming reliance on his mother's and wife's views.

Contrast this with Kyle Bass' hedge fund commissioning market research in Germany pursuant to his investments in the Eurocrisis.

Didn't Ackman unsuccessfully tried to force Target to mortgage its real estate values several years ago? Then failed to take over or rescue Borders more recently?

Here's a chart depicting price series for Penney, Target, Sears Holdings and the S&P500 Index for the past five years.
Not surprisingly, Target and the S&P have outperformed Ed Lampert's Sears and the Penney. Lampert hasn't seemed to have done all that well with his Sears/KMart conglomeration. Despite seeing this, Ackman seems to believe that, though also a hedge fund manager, he has the magic touch for retail success.

Retail is a very tough business. Why these hedge fund guys think they can just swarm into an underperforming retailer, buy control and force it to revert back up to some better-performing mean is beyond me.

Sometimes, underperformers, especially retailers, are so for a valid reason. And they aren't likely to come back from the ailing/dead. Customer perceptions and buying habits aren't necessarily easily changed, once soured on a brand or retailer.

I guess we'll see how magical Ackman's- and his wife's and mother's- touches are at Penney in the months/years ahead.

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