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Costco Wholesale Corporation (COST), J.C. Penney Company, Inc. (JCP): Should You Invest Alongside Soros In This Battered Retailer? are two ways to invest in retail stocks. You can focus on strong and steady operators such as Costco Wholesale Corporation (NASDAQ:COST) or Wal-Mart Stores, Inc. (NYSE:WMT) and hope to secure moderate upside. Or you can be bold and buy shares of truly struggling retailers that have fallen deeply out of favor.

That latter approach has been extremely profitable in 2013 for anyone with the guts to invest in GameStop Corp. (NYSE:GME) or Best Buy Co., Inc. (NYSE:BBY). Just a few quarters ago, these companies looked to be in deep trouble as spending on video games and consumer electronics, respectively, increasingly was taking place at rivals. Those two retailers have found a way to lure back customers, and the payoff has been huge.

Major investors are now scouring the retail landscape in search of the next turnaround play, and mega-investor George Soros thinks he’s found one. In this year’s second quarter, he plunked down $3 million to buy shares of J.C. Penney Company, Inc. (NYSE:JCP) at an average price of $16.83. Not only should a purchase of that size get your attention, but it’s also notable that shares are now 20% lower. You’ve got a chance to ride herd with George Soros, at a solid discount.

But should you? This is certainly a company in trouble, with a great deal of risk. I’ve already been burned once, noting roughly a year ago that then-CEO Ron Johnson had crafted a creative new strategy to help differentiate the struggling retailer from the pack.

Johnson’s strategy ultimately failed, and the board has brought back former CEO Mike Ullman to help stem the bleeding. In his previous tenure, Ullman wasn’t held in high regard by investors, so the move to reinstate him was a bit curious. The board knew that Ullman would at least unwind some of his predecessor’s most egregious moves.

Roughly three months ago, my colleague James Brumley helped frame the issue, identifying the necessary steps to help bring J.C. Penney Company, Inc. (NYSE:JCP) back to relevance.

To be sure, Ullman has yet to stop the hemorrhaging. Fiscal second-quarter sales slid 12%, and gross margins dipped below 30%. That figure, which used to hover in the upper 30s, means the difference between solid net profits and massive net losses. Analysts expect the latter, calling for J.C. Penney Company, Inc. (NYSE:JCP) to lose more than $5 a share in the current fiscal year and more than $2 a share in fiscal 2015.

With J.C. Penney’s shares down 20% since his $3 million purchase, you’ve got a chance to ride herd with George Soros, at a solid discount.

But behind the dismal numbers, clear improvements are underway. In recent months, J.C. Penney has begun to:

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