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'You Can't Go Wrong': Stocks Still Cheap, James Altucher Says
Posted Aug 28, 2008 06:45pm EDT by Aaron Task in Investing, RecessionStocks jumped Thursday thanks to a strong second-quarter GDP report and another drop in oil prices.
The rally left the Dow up 213 points at 11,715, within striking distance of a weekly (and monthly) close above its 200-week simple moving average of 11,740 and (possibly) its Aug. 11 high of 11,867, notes veteran market watcher Richard Suttmeier. The proximity of such key technical demarcation makes Friday more important than a typical pre-holiday session. (How Dell's after-hours disappointment factors into tomorrow's trading remains, of course, to be seen.)
But James Altucher, managing director of Formula Capital, is looking beyond such short-term technical indicators and seeing a stock market that, to him, is a screaming buy.
Mega-caps like Microsoft, GE and ExxonMobil are trading with P/Es below that of the S&P 500, which itself Altucher says has not fully adjusted to the drop in oil prices. (The last time oil was trading around $115, the index was 10% higher, he notes.)
Altucher also believes the housing crisis and subprime news is "baked in" to the market. The fund manager and author shares some of his favorite individual names in the accompanying video but declares "you can't go wrong," with a basket of stocks as a long-term investor.
Disclosures and disclaimers:
- Altucher's comments came prior to Thursday's rally and reaffirmed his "everything is cheap" view from mid-July.
- Critics say Altucher is perennially bullish and has been too optimistic throughout this year; Altucher would (probably) counter that he is looking at the market from the perspective of a long-term investor seeking value - ala Warren Buffett - vs. a short- or (even) intermediate-term trader.
- Altucher has no positions in the stocks mentioned, but investing in big-cap stocks is not his bent, as discussed in the video.
40 Comments
areyoudreaming - Thursday August 28, 2008 07:51PM EDT
Dell is getting "cheaper" by the minute - what do you think Jame ;-)
Yahoo! Finance User - Thursday August 28, 2008 08:45PM EDT
Ok, lets take Dell as an example. DELL will open up tomorrow around $22. They have about $3 per share in net cash so lets back that out to $19. Lets annualize this quarter's profits and say they earn $1.42 this year (analysts are saying $1.59 so we are being extremely conservative.) Ok, so $19 / $1.42 is a P/E ratio of 13.3. This is cheap. DELL has never traded this cheap. DELL is certainly a buy at the open tomorrow. -James Altucher
Roger P - Thursday August 28, 2008 08:55PM EDT
Your wrong, the economy is much worse than you realize. You guys have completely decoupled with mainstreet.
plcguy68 - Thursday August 28, 2008 10:20PM EDT
10 bucks that guy's not even as smart as he looks...
Yahoo! Finance User - Thursday August 28, 2008 10:50PM EDT
Considering the low interest rates the market probably is cheap in some areas. However, you have to be a long term investor to make any money.
fugu4182003 - Thursday August 28, 2008 11:00PM EDT
Well, you may not even see $22 tomorrow morning. Snapshot below: After Hours: 25.34 0.13 (0.52%) 8:01pm EThelp
fugu4182003 - Thursday August 28, 2008 11:02PM EDT
Well, you may not even see $22 tomorrow morning. Later "After Hour" snapshot below: After Hours: 25.34 0.13 (0.52%) 8:01pm
ptyson35 - Thursday August 28, 2008 11:27PM EDT
Aaron I already knew that he didn't own any of these stocks. All around me I see evidence that things are getting tougher. That's the reality.
paulck_99 - Thursday August 28, 2008 11:29PM EDT
Cheap or expensive depends on 1) your time frame 2) your cash position, and 3) the unknown future. Diversify and invest on a regular basis are still the best strategies.
jnbanets - Friday August 29, 2008 12:32AM EDT
Lets all analyze this- Here's a guy giving the world reco's on so called cheap stocks he doesn't own? What a GREAT GUY! Maybe his relative or 'friend', or even himself after the interview might ALREADY own some of these.Could James be using his celebrity to create a bounce in the positions? Lets investigate this, and perhaps Dell is a great place to start.
weeklyta - Friday August 29, 2008 03:44AM EDT
Cheap stocks get cheaper. Nice, buy on a downtrend, hoping it will go up. I wrote an article specifically about this kind of stuff... www.weeklyta.blogspot.com
sg1551 - Friday August 29, 2008 04:36AM EDT
Tech-Ticker is totally "challenged", and so are all your guests.
Johnny Ike - Friday August 29, 2008 05:28AM EDT
he is correct. The future is good for Microsoft, GE, Exxonand others no doubt a buy now.
Yahoo! Finance User - Friday August 29, 2008 06:55AM EDT
Guy looks like he just got off a 5-day bender.
Pteradactyl - Friday August 29, 2008 09:33AM EDT
Roger P is on target. The economy is awful and will get worse. We're in the the tank until at least second quarter 09
jane122653 - Friday August 29, 2008 10:09AM EDT
This guy may know what he talking about, but it is easy to talk when you haven't put up any money. Shut up or put up is my motto. Long term, my arse, the small person who invests in their 401K can't afford to take a 15-20% cut. I took my money out of stocks four months ago and put them into goverment bonds and stopped the bleeding. I've cut a 14% deficit for the year to -2% in four months. I'd rather get 3% on money than -14%. Recently I put some back into the markets to buy cheap -- what I was willing to risk. I feel like most of the experts, it is going to be a roller coaster ride for another good year. Let these banks finish making their full disclosures and then I make think about getting back in the market. All the bad news hasn't come out yet, once that stablizes, they the small investor can get back into the market.
freeridingsnowboarder98 - Friday August 29, 2008 04:10PM EDT
Jane, I was reading your blog and thought I wrote it! I agree. I also stopped the bleeding.
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areyoudreaming - Thursday August 28, 2008 07:50PM EDT
Dell is getting "cheaper" by the minute - what do you think Jame ;-)