I think it’s easy to avoid value traps. The trick is to stay away from companies that can’t grow their cash flow and increase intrinsic value. If I think the business is a “melting ice cube” like newspapers, yellow pages, and video rentals, to name a few bad businesses, then I won’t invest in it, no matter how cheap it is. Conversely, if I invest in a business that can be purchased at a discount to its intrinsic value, and that value is growing, then all I have to do is wait and be patient. As Buffett says, “Time is the enemy of the poor business and the friend of the great business.”
Kevin Daly
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