George Athanassakos | Red flags to look out for in value-trap stocks

In his op-ed for The Globe and Mail, George Athanassakos examined value-trap stocks and provided insights into what types of companies have the potential to develop into a value trap.

A value trap is a stock that appears to be cheap due to a significant drop in price, but is in fact not actually undervalued.

“It falls further in price and fails to recover within a value investor’s investment horizon of three to five years and at worst goes bankrupt,” said Athanassakos.

He noted that poor management, a corrupt company, or a company with a poor strategy in place are all indicators of a value trap.