Guest Post: Jim Altucher Proves Yet Again The Truth And Koolaid Don't Mix

By Geoffrey Batt, founding partner and managing director of Euphrates Advisors LLC, a frontier market fund management company

James Altucher’s work is supremely two things: bullish (permanently so) and flawed.  It is on the latter that I wish to briefly comment. 

Altucher penned an article in yesterday’s WSJ called “What 4 Bullish Billionaires are Buying.”  In it he makes the following claim: “Very interesting new changes for Warren Buffett.  The richest man in the world (or #2 or #3, it varies day by day) bought 17 million more shares of Johnson & Johnson (JNJ). JNJ has everything going for it: It has a 3% dividend, has raised its dividend for 48 consecutive years and trades for just 11 times forward earnings, its lowest P/E ratio ever.”

I suggest both the WSJ and Mr. Altucher take better care in fact checking, as J&J’s P/E ratio was lower on at least three occasions: 1947, 1950, and 1980. 

  • In 1947, J&J traded at a 52-week low of $24.625 and earned $4.64 per share, yielding a P/E ratio of 5.30.

  • In 1950, J&J traded at a 52-week low of $ 48 and earned $6.49 per share, yielding a P/E ratio of 7.39.

  • In 1980, J&J traded at a 52-week low of $ 66 and earned $6.50 per share, yielding a P/E ratio of 10.15. 

Altucher fancies himself a market historian of sorts, often using data from the distant past to underpin his arguments about the present and future.  I, too, see Altucher as a market historian- a revisionist one.