It’s important to distinguish between valuation anomalies and value traps. Some companies are lowly rated for a reason. For instance, if quality of management, pricing power, profit margins, cash flow generation, return on capital and economic value added – the rate of return (ROR) over a company's cost of capital – are below par, then don’t expect investors to pay a full valuation for a slice of the action.
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Small Companies
Running bull market winners
Simon Thompson highlights a quartet of outperforming small-cap investment opportunities
Simon Thompson