From now until 29-Jan, you could access https://app.sli.do/event/lxmezhxh and ask questions anonymously.
Q:How long do you hold a stock, especially if it didn't move at all (aka value trap)?
I would disagree that when a stock (price) doesn’t move at
all, that doesn’t qualify it as a value trap.
I think it warrants a deeper look into the company's financials and ponder why it
doesn’t move.
For e.g., if a toy manufacturer is not doing well, but the
other toy companies are doing amazing business (as in P&L wise), perhaps the
former is not doing a good job and deserves to be call a value trap.
Company with loads of cash and have no idea how to deploy it
for years? Yea, value trap.
What about when the company is not doing very well, but
management opt to increase its own salary? Definitely a value trap.
Having said that, I am not that good in investing to avoid
them. I have two companies in my portfolio that are not doing so well in terms
of prices… and I am inclined to agree with the market that they deserve its
current prices. The only saving grace is that the management is not outright
incompetent or hostile to shareholders, and they pay a decent amount of dividend.
Could they have do something to increase shareholder value?
Definitely… but there is nothing I can do about it.
I am inclined to wait another couple of years and see. I have
been holding them for about 2-3 years now, so I guess I would start to think of
re-deploying them when the management start misbehaving, or if I find something
better to invest and I needed capital. Meanwhile I would just collect dividends
and wait it out.
So in short, 3-5 years or when I realize that management is
the reason for the value trap.
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