(Corrects Feb 14 story to show Soros sold some but not all J.C. Penney shares)

By Svea Herbst-Bayliss

NEW YORK, Feb 14 (Reuters) - Soros Fund Management, one of the hedge fund industry's most closely watched investors, trimmed its stakes in J.C. Penney and Herbalife late last year, marking a notable shift in course only months after buying into the companies.

The New York-based firm, which ranked as J.C. Penney's second biggest investor, sold 6.15 million shares during the last three months of 2013, according to a regulatory filing on Friday. At the end of the quarter, the firm owned 13.8 million shares, down 30 percent from what it held at the end of the third quarter. It also cut its stake in Herbalife, where it was the fifth biggest investor.

J.C. Penney and Herbalife spent most of last year in the spotlight, with the retailer's stock price losing half its value as an ambitious overhaul fizzled and the nutrition and weight loss company surging 139 percent in the wake of a dramatic faceoff between some of the world's biggest investors.

At both companies, Soros' involvement, fueled by the firm's history of making a lot of money on savvy bets, boosted the share price and raised their credibility quotients, possibly even drawing in other hedge fund investors.

In the 40 years since 83-year old George Soros founded the firm, it has earned its investors $40 billion, including $5.5 billion last year, according to industry data. Even though the firm now invests only Soros' personal fortune, its investment decisions are still followed closely.

So when Soros bought 17.4 million J.C. Penney shares in April, not long after Ron Johnson was ousted as chief executive officer, investors cheered and pushed the share price up.

But as the company's once-ambitious turnaround plans lost steam and a former CEO returned to the helm, its biggest investor, William Ackman's Pershing Square Capital Management, abruptly exited in August. The share price kept tumbling and has lost 68 percent in the last 12 months.

While Soros was a steady J.C. Penney supporter through the end of the third quarter, the firm evidently changed its mind in the last months of 2013.

It had company in the form of other prominent managers who also made changes. Richard Perry, whose Perry Corp owned 10 million shares, sold out, and Kyle Bass's Hayman Capital liquidated its 5.6 million shares. David Tepper's Appaloosa Management also sold all of its 737,800 shares.

Fund managers who oversee more than $100 million are required by the U.S. Securities and Exchange Commission to report their U.S. stock holdings 45 days after the end of the quarter. And while the information is often backward looking, it can shed light on certain trends.

J.C. Penney still has prominent supporters, however, with filings showing that Larry Robbins' Glenview Capital kept its stake steady at 12.3 million shares and Highfields Capital still owned 3.2 million shares at the end of the fourth quarter.

Soros' involvement was similarly critical at Herbalife, where the media quickly identified Soros and Carl Icahn, Herbalife's biggest backer with $16.9 million shares, as the industry's elder statesmen facing off against a younger rival, Ackman. The 47-year-old's Pershing Square Capital Management has a $1.16 billion short bet against Herbalife and is accusing the company of running an illegal pyramid scheme. The company denies that accusation.

Icahn kept his Herbalife holding steady, but Soros has now trimmed its stake by 36 percent to 3.2 million shares from 5 million shares.

The family foundation of Soros' former lieutenant, Stanley Druckenmiller, no longer listed Herbalife on its filing, after having had held 79,032 shares at the end of the third quarter.

Hayman's Bass, another closely followed manager, liquidated his firm's stake by selling 436,371 shares.

Other firms have take some money off the table. Tiger Consumer Management cut its position by 48 percent to 400,000 shares, while Adage Capital Partners cut its stake by 40 percent to 441,276 shares.

Since January, a U.S. lawmaker's calls for regulators to probe Herbalife's business practices has helped push its share price down 15 percent. (Editing by Jonathan Oatis)