Every quarter, large money-managers have to disclose what they've bought and sold via "13F" filings. While Fools don't always (or even usually) follow what the big money does, we can often glean an idea or two by tracing their footsteps.

D. E. Shaw, the $30 billion hedge fund founded in 1988 by David E. Shaw -- who was central to the revolution of computerized, quantitative trading -- sold some 3 million shares of struggling retailer J.C. Penney (JCPN.Q), reducing its stake by 85%, not including options. So does yet another large investor moving on indicate the death of J.C. Penney? Let's take a closer look.

Mike Ullman was central to Macy's turnaround 15 years ago, but he may not be able to save Penney. Source: J.C. Penney.

Penney continues to fight
J.C. Penney's struggles have been well documented. I'll admit, I've done my fair share of bashing the company, the board, and management, and honestly for good reason so far, as almost nothing that the company has done seems to be stemming the continual losses of both sales and traffic to its stores. However, CEO Mike Ullman and his team are making efforts to turn the ship, including a recently announced plan to reduce costs and losses, by closing 33 underperforming stores. While this will help cut costs -- management expects this effort will save $65 million this year -- it's barely a drop in the bucket, considering that Penney's losses over the past two years are measured in billions, with a "b." But management isn't giving up without a fight.

Cash burn, gun-shy vendors are the biggest threats
The real risk for investors today isn't that a big investor like D.E. Shaw is jumping in or out of a position. One of the foundations for many retailers is their relationships with suppliers, many of whom ship merchandise to retail, but don't get paid for sometimes a couple of months. As I outlined here, Penney is burning through its cash reserves at an enormous rate, and unless management can figure out how to stop the bleeding, and quickly reverse negative cash flow, the company is literally months away from a potential liquidity crunch that would likely see suppliers cut off any orders on credit and demand cash-on-delivery for new merchandise. 

Think I'm crazy? The annals of retail history are littered with the bodies of retailers that looked fine one day and had a terminal case of C.O.D. the next. Suppliers have very little motivation in continuing to ship merchandise to a company with falling store traffic and negative cash flow.

Earnings today
Penney reports earnings after the market closes on Feb. 26, and so far, there's little reason to expect the latest holiday shopping season was a watershed moment for the company's attempts at a recovery. We already know that comparable sales for the holiday season increased a paltry 3.1%. but that was coming off 2012's disastrous season that saw comps fall a whopping 31%. Even this year's small improvement leaves sales down 25% from two years ago.

Simply put, all investors can hope for is that management somehow figures out how the slow the hemorrhaging. It's a guarantee that you'll hear more talk about how the company is turning the corner. 

Final thoughts: Don't sell because of D.E. Shaw. Sell because Penney is a troubled company very close to failure.
D.E. Shaw operates on quantitative trading -- quickly jumping into and out of stocks, versus making long-term investments based on business performance. Shaw bought 3.4 million shares in the third quarter, and sold 3 million in the fourth, almost definitely at a loss. But the thing is, Shaw isn't investing your money, or operating on any kind of metrics that individual investors could even think of replicating. There's nothing to learn by following this hedge fund, which, with its massive technological edge, can process a news release and execute a trade before you could even open up the release in your Web browser. Harry Callahan, a.k.a. Dirty Harry, said it best: "A man's got to know his limitations."

With that said. selling Penney is probably the right call for individual investors as well. Frankly, Ullman and his team have a massively difficult task at hand, and it's not worth being caught with a position in this company when the music stops. Could they turn things around? Sure, but it's not a bet I'd take today. Not with my money.