James, sorry to bother you..if you have time, can you tell me what you think of JCP..it's at 52 week low today. I would think their physical store locations would be worth money no matter what..I'm curious what would be your buy-in price if you were to buy it..anyways, thanks.
hmm I am not sure what the real estate is worth. Some bad accounting rules don't allow fair values on obvious assets. Anyways we do know from their balance sheet they only have $300M in land and land is the only thing in real estate which appreciates in value the physical building shouldn't. So maybe the land is worth 4 times as much or $1.2B so the company has tangible book value of $3.2 B and it trades at $2.6B. But ya that price is made up with my fake real estate number.
Furthermore I think it will take them 2 full years to revers Johnson's masterpiece. I see them losing $600M the next 2 years and that was before they are issuing all this debt so maybe more. And if you remember before Johnson they were earning around $2 a share. I felt it could go up more but at this point $2 seems like a realistic cap. So why own a stock at $11 that may earn $2 in 4-5 years . And that's if they turn it around. There is significant risk that they don't. So it seems to trade at an overvalued price. I was thinking at $8 is fair value.
Though if you have some insight on the real estate values that would change my analysis. I am good at reading and making insights but I can't randomly guess real estate prices. And the annual report does not provide me with enough information to make intelligent guesses regarding that . Which is why the accounting rules stink for land values. Its affecting my investment decisions.
Thanks a lot James. I'm not a big expert in real estate but I do know location is key, and the malls these stores are usually on the top-tier level, nothing like local plazas or anything, more like flagship stores. You are right on the debt, that's going to hurt the share price..you know this situation reminds me of what happened to Macy's in 2007-2008..Some were even saying it was going to go bankrupt around that time..from around 10 bucks in 2007 it's now 45..So maybe this is a parallel waiting to happen, but I'll try to check their data better to see what I can come up with..Thanks as always for your meaningful and thoughtful analysis.