If you able to find a stock in this market that appears cheap, perhaps the attractive valuation is due to market inefficiency, and you have unearthed genuine value … or perhaps there are negative fundamental factors or industry dynamics at play. A ‘value trap’ is when you believe the former, but get the latter. Avoiding value traps is therefore essentially a function of having a rigorous analytical process, and following it. To find out how some of Australia’s most successful value investors do it, including John Abernethy, Roger Montgomery, Wayne Peters and Ben Rundle, Livewire posed the question: “What are the common characteristics of a classic value trap, and how do you avoid them?” Read below to hear what these Managers consider the most important parts of their process in sorting the ‘value’ from the ‘traps’.