Welcome to Episode #2 of the Zacks Value Investor Podcast.
Every week, Zacks value stock strategist, Tracey Ryniec, will discuss the hottest value investing topics.
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 (NYSE:GM): automobile manufacturer with a forward P/E of 5.6
4. Apple (NASDAQ:AAPL): 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.
Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
GREENBRIER COS (GBX): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
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Zacks Investment Research