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Last week, people saw the 7% spike in the S&P 500 and called it a relief rally. Markets breathed. Volatility cooled off for a moment. But what actually happened wasn’t just a response to Trump’s sudden 90-day tariff pause. It was a pressure release after days
Let’s talk markets. Specifically, let’s talk about what just went down (literally) in the Nasdaq this week. If you’ve been paying attention—or maybe even if you haven’t—it’s gotten pretty ugly pretty fast. I even tweeted something about it: Markets take the stairs up
The drop happened fast! If you blinked sometime in February, you might’ve missed that we were at new all-time highs. Now? We're in full correction territory. Just yesterday, the S&P 500 fell more 2%, and now close to 10% in less than a month. Not
Did you know that 56% of Wisconsin’s agricultural exports could be impacted by tariffs from Canada, Mexico, and China? Wisconsin now represents the 11th largest exporter of agricultural products in the U.S., up from 13th in 2023 (WI DATCP). In 2024, Wisconsin’s agricultural exports reached $3.97
So, here’s something no one seems to be making a big deal about: tariffs are rising fast, and they’re dragging the US economy down. You won’t hear much about it in the headlines, but the effects could start to pile up. Higher prices, weaker growth, and more
I used to chase low P/E stocks thinking they were bargains, until I learned that cheap usually means broken. Sometimes a stock looks like a steal on paper, but that low number might be hiding a lot of problems.
Let me break down what I've seen and learned about these value traps, and share a little wisdom from Warren Buffett on what to do if you already own a wonderful business.
A company's Price/Earnings ratio is its stock price divided by its earnings per share, showing how much investors pay for each dollar earned.
Recognizing a Value Trap
First off, a low P/E ratio isn't automatically a green light. Take Verizon for example. Its P/E is about 9.6, which is way lower than the S&P 500 average of 20, yet its stock price has dropped 33 percent over the last five years.
That got me wondering if that low number really meant a bargain or just a warning sign.
Then there's the issue of earnings. Even if a stock appears cheap, falling or stagnant earnings are a big red flag. I noticed that Verizon's quarterly earnings-per-share (EPS) dropped from $1.25 in 2019 to $0.78 in the most recent quarter. A business with declining profits justifies its' cheap valuation.
Sometimes it isn't just about one company—the whole industry can be crap. In the communications space, not only Verizon but also AT&T and Charter have been underperforming. Meanwhile, innovative players like Nvidia have posted impressive earnings (They're last quarter had 110% YoY growth).
And don’t be fooled by a high dividend yield. Take Walgreens, for example: it once was offering a 9 percent dividend, but recently suspended payments because of funding issues. A high yield might look attractive, but it can hide deeper problems that cause the stock to fall:
Lastly, management matters a lot. I learned that a shift in leadership style can change the game. Look at Apple: under Steve Jobs, it was all about breakthrough innovation and growth. Now, under Tim Cook, the focus has shifted more to preserving cash and buying back shares. When a company switches from a visionary founder to a caretaker mode, it’s a sign that its growth engine might be slowing down.
Hold on to Wonderful Businesses
Now here’s where Buffett’s advice really hits home. He once said, "If you own a wonderful business, the best thing to do is keep it. All you're going to do is trade your wonderful business for a whole bunch of cash, which isn't as good as the business, and you got the problem of investing in other businesses, and you probably paid a tax in between."
For me, that means if you already have a business that’s fundamentally strong and growing, don't sell it just to chase a stock that looks cheap or flashy.
The temptation of a low P/E should never override the value of a great business that has solid fundamentals.
Final Thoughts
What I've learned is that a low valuation doesn't always signal a bargain. Usually, those low numbers hide weak earnings, an out-of-favor industry, or management that’s lost its spark.
Before jumping in, dig deeper into the company’s fundamentals. And if you already own a wonderful business with solid growth, take Buffett’s advice and hold onto it instead of swapping it for a so-called bargain that might end up being a trap.