$M (Macys) – bought some at 21.5 – here is why….

At the beginning of 2017, suggested staying clear of hard brick retail – they are SO BEHIND – you still have to wait in line to pay for something – crazy!!!

Macy’s stock dropped below 20 and the valuation is very cheap – in fact you are getting the retail business for virtually nothing – remember when Yahoo was selling at price which implied the core business was worth nothing?

Look at the sum of the parts: According to Starboard capital the real estate alone is worth $21billion (it has over 700 Macy stores plus over 125 other stores like Bloomingdales), Net Debt is $6billion and the inventory is $5billion
So ignoring any cash – and it does generate $1billion of free cash per year – the tangible asset value could be

21x.5 (assume 50% of Starboard Valuation) – 6bn Debt + 30% of Inventory (assuming fire sale of inventory) = 5=6bn = which = the market cap of the company at $20.

The yield is a whopping 7% – which the CFO recently came out and confirmed would be sustainable – the free cashflow confirms that ….

2CentView Fair value = 27 so earnings are still forecast to be positive.
Also the Credit default swaps at 250bp indicate the company is NOT going out of business – however it needs to take radical action to turn the business around – dispose of assets and invest heavily in customer service and technology – like WalMart.
The flagship store on 34 street in NYC is amazing – just visited there last week and the business is good!

If you think Macy’s is a worth a trade, suggest the following:

Buy here at 21.5, Take profit target = $27, stop 17.

2CentView is in the above trade.