Cheap Stock or Value Trap? - Value Investor Episode 2 - a podcast by Zacks Investment Research

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In this episode, Tracey covers the value investor’s problem of determining whether or not a stock is actually cheap or if it’s a value trap. There are a lot of stocks that are trading with low P/E ratios but they’re not all great deals.

Tracey discusses:

1. What’s the definition of a value trap?

2. Tips on how you can easily distinguish between a cheap stock and a value trap

She provides 4 examples of a cheap stock. They all have forward P/Es well below the overall market and also well under the level she uses to find value stocks, which is a forward P/E of 15.

But are these also value traps?

1. Greenbrier (GBX): the railcar maker with a forward P/E of just 5.4

2. CF Industries (CF): nitrogen products manufacturer with a forward P/E of 14

3. General Motors (GM): automobile manufacturer with a forward P/E of 5.6

4. Apple (APPL): technology gadget maker with a forward P/E of 11.7

If they are a value trap, should you be buying them anyway? Tune into this week’s podcast to find out.

Greenbrier: https://www.zacks.com/stock/quote/GBX?cid=cs-soundcloud-ft-pod
General Motors: https://www.zacks.com/stock/quote/GM?cid=cs-soundcloud-ft-pod
CF Industries: https://www.zacks.com/stock/quote/CF?cid=cs-soundcloud-ft-pod
Apple: https://www.zacks.com/stock/quote/APPL?cid=cs-soundcloud-ft-pod

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