By
Borsgade
In their recent commentary, Bill Nygren and his colleagues at Harris Associates discuss how to avoid value traps. In their perspective, value traps occur when a stock appears undervalued but fails to grow its per-share value at an acceptable rate. To avoid these traps, the Bill seeks stocks of companies with experienced management teams committed to shareholder value creation.
Despite the Oakmark Fund’s recent underperformance, Bill emphasizes the importance of adhering to a disciplined, time-tested investment process rather than making hasty changes. The team utilizes a “Devil’s Advocate” review process to challenge valuation assumptions, ensuring rigorous evaluation of investment decisions. This process has led to successful turnarounds for companies like Glencore and Mercedes-Benz, which were once detractors but became top contributors to the fund’s performance.
When a company doesn’t grow per share value at an acceptable rate, we consider the stock to be a value trap.
To avoid value traps, we seek cheap stocks of companies that are run by an experienced management team committed to creating value for its shareholders.
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Readers are advised that investing may involve a risk of loss that cannot be determined in advance, and that past performance and price development cannot be used as a reliable indicator of future performance and price development. For further information please contact info@borsgade.dk
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