When a stock drops over 30% in a single day, some people jump at the opportunity to buy low. But Keith McCullough reminds investors, a cheap stock can always get cheaper. In fact, that’s how bag holders are born.

“Those are called value traps,” Hedgeye’s CEO explains in this clip from The Macro Show. “There are many, many more of those than there are takeouts this morning. Let’s just be clear.” 

McCullough adds: “One classic mistake is value buyers come in too early before the cycle’s bottomed. This happened in 2001, this happened in 2008, and this is happening again. There’s a much, much longer list of new lows than there are these four to five stocks ripping to new highs.” 

Watch the full clip above. 

 McCullough: Stay (The Hell) Away From Value Traps  - TMS Banner