In his recent Value Investing Live presentation Jonathan Boyar provided some great insights into how value investors can avoid value traps together with some notable catalysts for change. Here’s an excerpt from the presentation:
Equally important is a catalyst or a trigger. If a stock is simply just cheap it can stay that way for a long time. That’s why you need a catalyst. You need to find the catalyst otherwise you’re going to fall into that value trap which is why so many value investors make that mistake.
So every time we come up with an idea we have to come up with a story. A reason why that stock is going to go up over a reasonable period of time.
Baron’s once called my father Mark the world’s most patient investor. I might not be as patient as him but I’m pretty close, and we’re willing to wait two, three, four years for our thesis to pan out, which I think gives us a competitive advantage.
Noteworthy Catalysts Include:
- The Initiation of a dividend or stock repurchase program that reflects a company’s strong balance sheet
- A possible corporate split or spin-off that makes economic sense, which would unlock shareholder value
- Management changes, acquisitions, macro themes and the prospect for improved operating performance due to business investments or changing industry/competitive dynamics
- A company controlled by an octogenarian with no heir apparent
You can watch the entire presentation here:
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