Jim Chanos is bearish and skeptical on a lot of things. Recently, he discusses with Value Walk what he considers as value plays and what are value traps.
Value stocks should contain the following characteristics:
Predictable, consistent cash flow
Defensive and/or defensible business
Not dependent on superior management
Low/reasonable valuation
Margin of safety using many metrics
Reliable, transparent financial statements
And these are the following traits of value traps:
Cyclical and/or overly dependent on one product
Hindsight drives expectations
Marquis management and/or famous investor(s)
Appears cheap using management?s metric
Accounting issues
In the following Scribd article, he explains them further:
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