Value TrapA value trap can often hurt bottom pickers in their quest to buy low and sell high. These stocks can disguise themselves as great opportunities when they really arent. There are two types of value traps, the first kind is a stock that has recently gotten a beating from the market and appears cheap. This stock may appear to be on sale but something could be fundamentally wrong with it, or it may be on the verge of bankruptcy.The second trap is when a stock appears to be low relative to their book value, PE ratio or any other fundamental value yet they do not seem to be making any big moves upward. Both of these types of stocks can hurt an investor in depreciation and opportunity cost. Although all long term investors will experience these stocks there are a few things you can do to lessen the odds of you getting trapped. 1. Check the companys future potential. If a company is big but has no growth in its future there is a chance the stock will not go up regardless of what the value of the stock should be. 2. Check the cash flow. Companies with high and growing cash flow are normally a good investment. 3. Check the stocks history, if the stock has been undervalued for many years without making any upward attempts, especially in a bulls market, it is probably better to assume there is either something fundamentally wrong with it that you are not aware of, or there is no interest in buying the company. 
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