The Cape Ratio Weekly, the newsletter from http://www.caperatio.com, says legendary investor George Soros probably uses some form of the CAPE Ratio himself (of course, supplemented with other analysis) when he makes a key investment.
This was in the context of J.C. Penney Company, Inc. (NYSE:JCP), which the newsletter points out has the lowest positive CAPE ratio value of 3.95 in the S&P 500 (computed when the limping retailer traded at $8.00).
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History could repeat itself
In an interesting observation, Caperatio.com says, “On December 20, 2000 the CAPE value was at 3.15 while the price held at $8.75. Same as now, in late 2000 people indicated that J.C. Penney Company, Inc. (NYSE:JCP) should not be held as an investment…then the price reached $85.86 in early 2007.”
Could history repeat itself this time around for J.C. Penney Company, Inc.(NYSE:JCP), when it again finds itself in dire straits? It’s difficult to say, but the market probably knows something we don’t. Last week rumors were rife that the retailer had appointed bankruptcy counsel. The stock fell 9% on Tuesday, though the company issued a terse denial saying there was no truth to the rumors. The stock held steady for a couple of days but was back to its sliding ways on Friday, closing at a low of $7.00.
George Soros holds 19.9 million shares of J.C. Penney
George Soros holds 19.9 million shares of J.C. Penney Company, Inc. (NYSE:JCP) and the stock’s performance last week must have hit hard. Could it be that he caught a falling knife? Or, does he know something the market doesn’t?
Says Caperatio: “We can only speculate whether George Soros isn’t in fact utilizing the CAPE Ratio to help him determine that an increased investment in J.C. Penney Company, Inc. (NYSE:JCP) is a good move. We will only know for sure in 2020.”
If Soros uses the CAPE Ratio, he is in august company. In our earlier article Caperatio found that Warren Buffett’s “overall portfolio clearly favors a strong CAPE Ratio value.”
Only time will tell whether J.C. Penney Company, Inc. (NYSE:JCP) holds value at these prices…or is simply dirt cheap.
Weekly Cape Ratio Values
Here are the latest Low Positive CAPE Ratios out of the S&P500 from CapeRatio, the home of the first online CAPE Ratio Calculator for Individual Stocks: