Another big winner was Actavis Inc. (ACT), formerly Watson Pharmaceutical. We first purchased Actavis in 2006 at $25. We kept buying the shares in 2007, and on June 30, 2013, it was priced at $126.22. It shows that when you are accurate in your estimation of intrinsic value and buy them at a significant discount, add in good management and respectable growth in intrinsic value, the investment works out really well. This is true even if you bought them when the market indices were trading at an all-time high. "Value traps" generally occur when you are wrong in your estimation of intrinsic value, pay too much and the company's intrinsic value is static and/or decreasing in value.
Dave Brickell is the co-founder and COO of stock market blog & research network, Stockopedia (www.stockopedia.co.uk). He previously worked as an Investment Director at Candover, Morgan Stanley and Credit Suisse First Boston. He has an MA in Law from Oxford and MBA with Distinction from INSEAD.
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