LHT Holdings

[weijian]

Dear all,

LHT had certainly done well lately in terms of share price! Year to date, it is up more than 30% and still going strong. A value trap? Certainly not, in my opinion.

This case study had underscored my view to always stay patient with stocks, especially when you do value investing. A stock can do nothing for years, but when it moves, it can surprise everyone, including myself sometimes.

Exactly, imho, value trap sounds like an excuse to say you don't understand why & what you buy in the first place. There is no such thing as value trap or growth trap, it's just a matter of you are right or wrong.

@ksir,
I seek to defer that there are no such things as value trap or growth trap.

Just ask those who lost money averaging down in leveraged entities, those that eventually turn out to be frauds or ones where the mgt continues to allocate capital in a non-OPMI friendly way. Or ask those in 2021 who bought promising companies on their way to greatness. But when the environment changed, greatness didn't look as certain as it used to be.

Just because we know how to avoid them, doesn't mean they don't exist.

A person who has the tendency to buy cheap (eg. low P/E or P/B) has a tendency to fall for value traps. Because a large portion of their original hypothesis was cheapness. So as it got cheaper quantitatively, they may be blinded by the quantitative aspect and miss out that Mr Market may have valued it correctly from a qualitative perspective. As they average down, they may eventually find themselves losing anything from 50-80% of original capital.

A person who has the tendency to buy quality (valuation based on price to sales) has a tendency to fall for growth traps. Because a large portion of their hypothesis was about growth, as long as the growth story stays intact and passes their qualitative checks, they forgot that growth have slowed down or the trend buyers have decided to exit and take profits. Eventually, because they bought at/near ATH, they may eventually find themselves losing anything from 50-80% of original capital.

@ghchua,
I look at the price history of LHT Holdings and saw that it increased ~20% in just a few days. I am genuinely surprised there wasn't a SGX query. Wouldn't be surprised that some corporate action has been leaked in advance of time...