Value Investing
An investment strategy focused on buying undervalued securities trading below their intrinsic worth.
Definition
Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Pioneered by Benjamin Graham and David Dodd in the 1930s and popularized by Warren Buffett, value investors seek companies with strong fundamentals (low P/E ratios, high dividend yields, low price-to-book ratios) that the market has temporarily underpriced. The concept of "margin of safety" — buying at a significant discount to intrinsic value — is central to value investing. Value stocks have historically outperformed growth stocks over very long periods, though growth has dominated in recent decades. Value investing requires patience, as undervalued stocks may take years to reach fair value.
Related Terms
Fundamental Analysis
A method of evaluating a security by examining its intrinsic value through financial and economic data.
InvestingP/E Ratio (Price-to-Earnings)
A valuation ratio comparing a company's stock price to its earnings per share.
InvestingDividend Yield
The annual dividend payment divided by the stock price, expressed as a percentage.
InvestingPortfolio
A collection of financial investments like stocks, bonds, cash, and other assets held by an individual or institution.