J.C. Penney Company, Inc. (NYSE:JCP): $1 Million CEO Insider Buy – Why?

As you might expect, insider buying slowed during Thanksgiving week, but that doesn't mean the week was void of any purchases worth monitoring.

In fact, our selection for this week's pick checks-off multiple boxes that iStock considers when deciding on which company to write about.

Seven figures buy from a key insider – checkHistory of solid performance – checkBottom Fishing/Turnaround/Buying against the grain story – check

Last week, beleaguered retailer J.C. Penney Company, Inc.'s (NYSE:JCP) CEO, Mr. Myron E. Ullman, III pulled out the checkbook and wrote a two-comma check. Ullman bought 112,000 shares at $8.85 per for a total investment of $1,002,399.

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That's a giant black or red bet, folks; especially considering that many Wall Street pros think the retailer is in danger of going out of business as evidenced by 51.7% of JCP's float (stock available for trading) currently sold short.

Apparently, the CEO has a different view?

In the past two-years, Ullman's only other JCP activity occurred in December 2011 and January 2012 when he sold more than $6 million of the stock. Now, he was on the way out as CEO in February of 2012; so, the sales may have been motivated by something other than price and business prospects. Nonetheless, discarding J.C. Penney shares at $40.72 and $32.59 appears pretty wise in retrospect, no matter the motivation.

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It's hard to identify any positives within Management's Discussion and Analysis of Financial Conditions after reviewing the company's most recent 10-Q.

Same Store Sales - downNew merchandise – not popularFoot Traffic – down

This has to mean whatever drove the CEO to part with $1 million occurred within the past few weeks. According to CNN Money, the retailer showed "signs of life" on Black-Friday with customers returning to JCP.

However, when we turned to Google Tre! nds to see search volume intensity scores for "JC Penney" during November 2012 versus November 2013, iStock found that web queries are down 15.4% year-over-year. If there is any good news to be from the Google tool, it is that 2013 is trending higher heading into December, whereas 2012 was flat to down.

The only other consideration, in our view, is JCP's valuation. Since the end of September, the company has traded at five-year low territory on a price-to-sales (P/S) basis.  From September 30th forward, the P/S ratio has been under 0.185, which was the half-decade low set briefly in March of 2009. On average, Wall Street valued J.C. Penney at 0.35 times sales going back to 2009. The stock would need to double almost from here to get back to the five-year norm.

Overall: It's our guess that Mr. Myron E. Ullman III's million dollar buy was based on valuation and maybe, maybe mildly improving sales trends at J.C. Penney Company, Inc. (NYSE:JCP).