Value investing - Financial definition
Concise definition of the term value investing
Value investing is a strategy where investors select stocks that appear to be trading for less than their intrinsic or book value. This approach aims to capitalize on market inefficiencies by purchasing undervalued stocks and holding them until their price reflects their true worth.
Comprehensive definition of the term value investing
Value investing, pioneered by Benjamin Graham and popularized by Warren Buffett, involves a thorough analysis of a company's fundamentals, such as earnings, dividends, and growth prospects, to determine its intrinsic value. Investors look for stocks with strong fundamentals that are undervalued due to market overreactions or temporary setbacks.
For example, during economic downturns, many solid companies might see their stock prices fall disproportionately, presenting opportunities for value investors to buy low and potentially sell high when the market corrects itself. Key practices include scrutinizing financial statements, assessing management quality, and considering the broader economic environment to ensure the company is fundamentally sound despite its current low valuation.