Value traps: A clever disguise

A common misconception surrounds this popular term.

By Wall Street Media on MSN Money Jan 20, 2010 5:48PM
Written by Douglas Estadt

The term "value trap" was created to smudge the footprints of bad investors. My brilliant friend Todd Sullivan sheds light on the increasingly popular and delusional use of "value trap" in today's video. It's used to describe something bought by someone thinking that it was cheap, only to have the stock then remain cheap or decrease further. Why we dislike the term:

 

  • This is essentially a "get out of jail free" card for making a bad investment.  
  • You don't need a strong thesis behind why you hold on to a stock.
  • It makes it difficult to learn from one's investing mistakes.

 

In the future, investors should call facts as they see them and take responsibility for the outcomes, just like Todd. 


Watch the video below to learn more about Todd's thesis.


To see where I have my investment dollars now, or to follow my picks, click here.

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