I keep buying 'cheap' names that turn out to have been cheap for a reason. What is the missing diligence step?
u/Plus_Year_9777 ·
Reddit — r/Vitards
· May 15, 2026 at 14:15
· ⬆ 12 pts
· 💬 8 comments
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Summary
Post describes the author's poor track record (40% hit rate) when buying cyclically depressed stocks that appear cheap, but later reveal hidden structural shifts (customer base, input costs, regulation).
Author asks the community for specific diligence steps they may be missing (channel checks, proxy statements, industry trade sentiment) to improve screening for value traps.
Quality assessment: This is a reflective, process-oriented question, not a specific trade thesis. It contains useful self-analysis but no actionable DD or market call.
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Three years of trying to buy cyclically depressed names with seemingly clean balance sheets. Hit rate is roughly 40%. The 60% that did not work all had something in common in retrospect: I missed a structural shift in the customer base, or in input costs, or in the regulatory environment. The frustrating part is that all of these were knowable from the 10-K and the conference calls. I just was not weighting them correctly because I was anchored on the cheap multiple.
For people who run a higher hit rate than that, what specifically are you doing in your diligence that I am probably skipping? Channel checks with customers? Reading proxy statements for management quality signals? Sentiment analysis on industry trade press?