Bill Nygren: Low multiples does Not equal value

In this interview with John Rotonti, Bill Nygren defines a value trap as a company that looks cheap (low multiples) but won’t actually become more valuable over time, typically due to structural problems. To avoid these, Nygren requires analysts to project future growth and only buy stocks with strong growth prospects.

Buying great businesses at average prices is as much value investing as buying average businesses at great prices. The idea that every business trading at a low P/E, P/B, P/anything ratio is a ‘value stock’ is just plain stupid.

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