An Effective Way to Screen for Value Traps

Case Notes 02: Value trap and other Pointers from Ekson's case study. Revision date: 20 Sep 2020 Can you screen for value traps? First thing first. If you have not read the Eskons case study ( Part 1 and 2 ), I suggest that you do so in order to maximize the value from this post. Investopedia defined a value trap as “… investment that appears to be cheaply priced because it has been trading at low valuation metrics…The danger of a value trap presents itself when the stock continues to languish or drop further after an investor buys into the company.” Value trap is a common search for phrase as the Google Trend report below shows. The chart indicates that there is some interest in value traps over the past 5 years. It is not surprising to note that during the current pandemic, there has been a slight increase in interest in value traps. You would have thought with the sustained interest, there would be a common understanding of what the phrase meant. However, a survey of