Unmasking The Value Trap

Does Value Investment Work?

A value trap is a situation in which an investment appears to be undervalued based on traditional valuation metrics. They may be trading at low price to earnings ratio or price to book ratio or higher dividend yield but the stock price continues to decline or remains stagnant for an extended period. The article takes a closer look at how value trap works and how it can be avoided 

In the bustling city of Mumbai lived a young and ambitious investor named Ravi Raskar. Ravi had always been fascinated by the world of finance and had a keen interest in exploring various investment strategies. He had heard tales of great investors who had amassed tremendous wealth by following the principles of value investing. He was especially inspired by Warren Buffett, referred to as the ‘Oracle of Omaha’, whose investment approach is heavily influenced by value investing principles. Buffett’s story of buying See's Candies is often cited as an example of his value investing principles. He purchased the company in 1972.