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Soros raises JC Penney stake but two big investors exit in second quarter

Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid
Customers ride the escalator at a J.C. Penney store in New York August 14, 2013. REUTERS/Brendan McDermid

By Svea Herbst-Bayliss

BOSTON (Reuters) - Billionaire investor and philanthropist George Soros likes ailing retailer JC Penney so much that he added another 2 million shares to his already large investment, according to regulatory filings released on Wednesday.

Soros, who made news four months ago when he first announced a passive stake in company, reported owning 19.98 million shares at the end of the second quarter. The JC Penney holding is now the fourth largest in the portfolio.

The increase makes Soros Fund Management, which invests about $20 billion on his and his family's behalf, the retailer's second largest investor behind activist hedge fund manager William Ackman whose Pershing Square Capital Management owns 39 million shares.

Soros, whose investment decisions have been widely followed for decades, stepped into JC Penney shortly after CEO Ron Johnson was ousted after 17 months on the job with his plans to make over the store in tatters.

News of Soros' initial investment sent shares up 7 percent after they had closed at $15.24.

It also gave Ackman, a sometime tennis partner of Soros', a boost by suggesting that the two powerful men were now aligned. However, that may have changed, particularly as Soros Fund Management has also taken a new stake in Herbalife Ltd , the company Ackman is betting against, calling it a pyramid scheme.

On Wednesday, one day after a board room blowup prompted William Ackman to resign his directorship, JC Penny shares closed up at $13.11, and climbed 4 percent in after-hours trading.

Even as 83-year-old Soros is sticking with JC Penney, other prominent investors including hedge funds and big mutual funds, have trimmed or even completely exited their positions.

Hotchkis & Wiley, which had owned 10.1 million shares at the end of the second quarter, and Tiger Global Management, managed by Feroz Dewan and Chase Coleman and which held 5.3 million shares, liquidated their positions between April and the end of June, Securities and Exchange Commission filings showed.

Larry Robbins' hedge fund Glenview Capital, also one of JC Penney's biggest owners, cut his holdings to 8.4 million shares at the end of the second quarter from 9.5 million he held at the end of the first quarter. Fidelity Management & Research sold about half of its position and now owns 4.6 million shares.

Money managers who invest more than $100 million are required to report, in a so-called 13F filing, their holdings in U.S. stocks 45 days after the end of the quarter. While the information is backward looking, it can give clues to how investors are viewing certain companies and how their strategies are unfolding.

Just days into the second quarter, Ron Johnson, handpicked as J.C. Penney's chief executive by Ackman, was pushed out after only 17 months on the job.

The company brought back Myron Ullman, who had been replaced by Johnson as CEO, but investors, including Ackman, interpreted the step as a short-term move, which created more uncertainly.

Although the company's stock recovered some ground during the second quarter and ended the three months up 15 percent at $17.08, it has fallen steadily since then.

It was unclear exactly when the managers exited or trimmed their positions.

In addition to Ackman and Soros, JC Penney also has hedge fund manager Richard Perry as a powerful supporter.

Perry, who is married to fashion designer Lisa Perry and took over luxury retailer Barneys New York last year, owned 12 million shares at the end of the second quarter, according to a filing made last week.

Similarly, hedge fund Tiger Consumer Management raised its stake by 2.05 million shares to 5.43 million at the end of the quarter.

(Reporting By Svea Herbst-Bayliss; Editing by Steve Orlofsky, Bernard Orr)

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