The volatile market environment has provided investors the opportunity to buy some stocks at discount, said Jim Cramer on CNBC’s “Mad Money.” After all, quality stocks are sometimes brought down with the overall market when they should probably be trading at higher levels, Cramer said. Investors should be careful, though.
“There are other stocks that have sold off for a very different reason: because they deserve to go lower. These stocks are dangerous,” Cramer said. “They lure you in with apparently low valuations that seem cheap and then they lose you boatloads of money because they aren’t really cheap — they’re what we call value traps that have a long way to fall before they can find a bottom.”
Cramer put together a list of potential value traps. He recommends investors stay away from these stocks for at least one quarter, so the underlying companies can turn things around.
Best Buy: This stock is currently trading at 5 times next year’s earnings with a 5 percent growth rate, Cramer said. It has lost 31 percent in the last month, too. While some analysts have recently thrown this electronics retailer an upgrade for its cash flows and big buyback, Cramer isn’t so optimistic.Page 1 of 3 | Next Page