JC Penny (JCP) still volatile, but on track to beat the S&P 500 in 2014

by admin on May 12, 2014

In my February letter to investors, I explained why I was increasing my position in JC Penny (JCP). Since that post, the stock has continued to be very volatile in 2014 with double-digit gains and drops depending on the day. This is always the case when companies are having trouble, and in the short term, this volatility mostly benefits speculators and day traders. My belief is that if you actually do your homework and stick to your guns, in the long term these types of “beaten” stocks can frequently be very rewarding. An investor just needs the right measures of calm and patience in order to protect against the desire to sell in a panic. Most of the time this also requires an investor to ignore the media and “professional recommendations” to buy or sell.

Despite the fact that JC Penny is underperforming the S&P 500 thus far in 2014 (-3.83% vs 1.62% of the S&P 500), the company is on the right track for recovery. They are working toward recovery in ways that have historically been successful for other companies in similar situations – renegotiating debt, cutting expenses, stopping dividends, and increasing productivity. My tip this time is to disregard any short-term price fluctuations that JC Penny (JCP) may have and to be patient. This stock will rise again and stabilize, but as I’ve said before it isn’t going to happen overnight. The global economy, individual companies, and frequently human beings all work the same way. Most everything goes through cycles with periods of abundance and spending, followed by periods of austerity and re-adjustment. As the old adages go, nothing stays up forever, and nothing is ever really as bad as it looks.

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