Value traps are piles of shit and a waste of valuable capital.
Here are the top 23 ways to know if a company you are invested in is a value trap.
- The CEO and CFO ignore your entire existence. You have sent the executive team 10,000 emails and have not had one reply. If you did get a reply the CEO likely forwarded your email to the CFO saying, “no need to reply to this” and accidentally CC’d you on the email. You mean nothing to them. Even if you own 10% of the entire company, they will not reply to you.
- The CEO has a deep tan, gold jewelry, silver chest hair sticks out of his $100 dollar Armani shirt and takes a crazy salary.
- If the CEO is an older “gentleman” he is likely on his third or fourth wife by now. The wife was a former model and is 30 years younger than him.
- The CEO has history of sexual scandals at work.
- The company has gone to the same shitty conference for the past ten years. Over the past ten years revenues have declined, earnings have declined and SG&A increased. This year will be the year that all of that investment in SG&A pays off!
- The CEO’s watch is worth more than the enterprise value of the company.
- If you are watching the company present at a conference and the only investors in attendance are guys dressed like Dwight Schrute. This is definitely a value trap. Stinky deep value investors = Dwight Schrute style of suits.
- If there are a ten million adjustments to get to EBITDA.
- The executive bonus compensation is based off subjective and non-measurable goals.
- Bonuses are based off the amount of “growth capex” spent for the year.
- If the board of directors looks like they will be in an obituary soon.
- The Glassdoor reviews look like someone with a “Karen” haircut complained to a manager.
- If the CFO says, “we expect to be cash flow positive in the back-half of the year” on a conference call.
- No questions are allowed on a conference call.
- The company only takes “emailed” questions on a conference call so they don’t get bitched out by pissed off investors.
- If the company is in a “horse and buggy industry” and is trying to reinvent itself by investing in an industry they have no idea how to run, which is competitive as balls and makes no money.
- The stock chart looks like an old lady falling down a flight of stairs.
- The company is headquartered in Canada.
- There is a university professor on the board that has zero real world business experience.
- A hedge fund guru just took control of the company thinking he can turn the company around but will fail horribly because he has no real operating experience and is just an excel sheet loser.
- If there was a recent strategic review and nothing “strategic” came of the review.
- The headquarters is located 10,000 miles away from the company’s actual operations in a fancy area.
- The segments are reorganized every quarter to hide unprofitable divisions.
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Source of Featured Image: Pile of Shit