By Jack Forehand, CFA, CFP® (@practicalquant) — Value traps are the bane of a value investor’s existence. We build our strategies around buying cheap companies and hoping the market will eventually see things…
Tag: Value Traps
Six Potential Metrics to Help Limit Value Traps
Deep value investing is about buying companies that other investors don’t want. It is about investing in companies where the current situation doesn’t look great – actually in many cases…
The Challenges of Avoiding Value Traps – And Some Criteria That Might Help
By Jack Forehand, CFA, CFP® (@practicalquant) — I wrote an article a few weeks back that looked at how much of the outperformance of value stocks since the bottom in March of…
Excess Returns, Episode 5: The Double Edged Sword of Avoiding Value Traps
Many value stocks are cheap because they deserve to be. Some of them no longer have sustainable businesses, and as a result their current discounted multiple will look really expensive…
Value Stocks or Value Traps?
A recent Morningstar article discusses the risks associated with value stocks, which are now cheaper than ever. The article cites a recent report by BlackRock that issued a “stark” warning:…
Finding Industries that Present Investment Opportunities
A recent article in Forbes discusses strategies for finding investment opportunities in out-of-favor industries and avoiding value traps. Here are some highlights from the article: Investors can avoid falling into…
The Double Edged Sword of Avoiding Value Traps
By Jack Forehand (@practicalquant) — Value investing is full of pitfalls. It is easy to think that as a value investor all you need to do is buy cheap stocks and…
Value Trap Warning Signs
Today’s high stock market valuations make cheap stocks attractive, but a recent Bloomberg article warns that the market is “littered with ‘value traps’—stocks that look cheap but never substantially rebound.”…
Chasing Dividend Yield Into a Value Trap
In their ongoing pursuit of dividends, investors should be careful not to indiscriminately buy with only dividends in mind, according to strategists at Mellon Capital in this week’s Barron’s. “Building…
How Value Traps Can Pull You In and Spit you Out
A post in Institutional Investor highlights a “value trap” that arises when stocks appear cheap but are within a sector that “experience[s] high levels of asset growth [then] collapse.” Examples…