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Buyer Beware - These Stocks Are Value Booby Traps: Pro


Investors looking for bargains amid today’s sell-off beware. Research firm Markit is out with a new report warning that some stocks which look like deep values are anything but.

In a live interview on CNBC’s Halftime Report, Will Duff Gordon, Markit Research Director tells us many investors are seeking value stocks “because value has outperformed other strategies over 9 of the past 12 months.”

However, there are a number of stocks that would seem like buys, but in fact, are booby-traps.

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Although Gordon’s analysis is complex a part of it involves the degree to which so-called value stocks are being targeted by short sellers.

“Short investors are typically smarter than the long guys,” adds trader Simon Baker, CEO at Baker Avenue Asset Management, “because they stand to lose a lot more money. Before you get long, checking on the short interest is a smart thing to do.”

And according to Markit, the following value stocks have seen a surge of short interest.

Following is his list:

                                % Shares on Loan                12-month change
Safeway                    30%                                        Up 199%
RR Donnelley               24%                                        Up 56%
NU Skin                      12%                                        Up 61%         
Hasbro                       14%                                        Up 209%      
Pitney Bowes              23%                                        Up 11%
Source: Will Duff Gordon, Markit

If the smart money doesn’t think these stocks are values, you might want to take your money elsewhere.

Value Traps

Posted by CNBC's Lee Brodie

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Trader disclosure: On August 23, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Stephanie Link is long AAPL; Stephanie Link is long JPM; Stephanie Link is long WY; Brian Kelly is long SPY Puts; Brian Kelly is short SPY; Simon Baker is long AAPL; Simon Baker is long INTC; Simon Baker is long WMT; Simon Baker is long PBI; Michael Murphy is long WFC; Michael Murphy is long LNG; Michael Murphy is long HTZ

For Will Duff Gordon
Nothing to disclose

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