Friday, April 11, 2008

Avoiding value traps.

Stocks may appear cheap but may be about to get much cheaper.

If a great company is trading at a ridiculously cheap price then why is management not buying all it can from the open market?

I prefer to wait for management to buy in the open market. This simple strategy will help me avoid value traps.

As an example look at Moody's. A great company facing a few tough problems. I will not buy until the executives use their own money to buy in the open market. You can track insider buying at Moody's here.