I am regularly reading and hearing that the practice of buying cheaply valued shares is a dying art and may even be a dead one. Since the financial crisis of 2008 many investors have flocked to the comfort and relative safety of quality growth stocks and have benefited handsomely from doing so.
Those that have tried to make money from value investing have had a much harder time. In many instances the reason for their poor experience was simply that what they were buying wasn’t undervalued in the first place.
All too often they bought into a weak business that faced many challenges and was actually getting weaker and not going through a temporary rough patch. This is the classic value trap that has the capacity to seriously harm the investor and knock big holes in their portfolio’s performance, which needs to be avoided if at all possible.