market folly

Last week we posted up notes from the Ira Sohn Conference including a summary of the Pershing Square founder's talk on J.C. Penney.  Now, courtesy of the WSJ Deal Journal, is Bill Ackman's slideshow presentation on JCP from the event.

Entitled "Think Big", Ackman examines the future of the retailer under new CEO Ron Johnson.  He notes that all the requirements for a turnaround are in place:

- Solid core business with natural competitive advantages

- New, high-quality management team

- Management incentives are aligned with shareholder returns

- High potential new sales strategy

- Abundant "low hanging fruit" in the cost structure to fund sales opportunity


The hedge fund manager compares the turnaround at JCP to that of The Gap (GPS) in the mid 1980's as that company had a broken model to fix, hired talented new management, implemented a strategy change, and after some poor results eventually turned around and the stock rose ~60x.

While JCP's first quarter was disappointing in terms of same store sales (SSS) and gross margin, Ackman is thinking long-term here and points to goals of growing sales and achieving ~40% gross margins.   He also highlights that the dividend cut has caused forced selling by yield investors.


Embedded below is Bill Ackman's slideshow presentation on J.C. Penney from the Ira Sohn Conference:




You can download a .pdf copy here.

Be sure to check out the rest of the notes from the Ira Sohn Conference where tons of big-name hedge fund managers presented.

And for more actual slideshows, we've also just posted up David Einhorn's Ira Sohn presentation on preferreds.