Historic Performance a Potential Value Trap


It is easy to fall into a trap of leaning on previous growth of a stock as a guarantee for the future earnings when the market is underperforming. However, what is considered a good investment more often than not can turn into a value trap that not only does not grow, but sometimes slides even further down.


Apple has seen a serious decline in its shares in the last few months, going down nearly 30 percent when compared with its summer numbers. While it is easy to consider Apple a safe bet due to its powerhouse status, the stock may have already seen its best days. iPhone sales are slowing down significantly, registering annual growth of under 1 percent. Apple itself has forecast that the sales of its premiere device have peaked and will start to decline, together with the company’s revenue.


With its shares down over 70 percent compared to the year’s high, it might be tempting to think that there is nowhere to go but up. But Twitter has never been a profitable company, and its growth is slowing down significantly. The number of new users has slowing down recently, and while the revenue has seen some nice growth, so have its operating costs. For example, for the third quarter, revenue was up by nearly 58 percent, but costs increased over 61 percent.

International Business Machines Corp.

The technology giant has not had a good year, with its stock going down close to 20 percent in the last twelve months. The company has seen anther decline in revenues, and the same is predicted for the current year. Add to that the fact that the sales of its products have been going steadily down for an astonishing fifteen quarters, dropping from more than $104 billion in 2012 to under $82 billion in 2015, it is clear that its former reputation is not enough warrant future growth.


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