An investing strategy (style) that involves buying stocks (or broadly, assets) that are undervalued relative to their intrinsic value (fundamental value). Under value investing, the target asset class is that of stocks issued by a company at a share price lower than their fundamental value. A value stock is a stock of a public company (publicly traded company) that allows a holder (buyer), i.e., a value investor, to pay a reduced price now in order to realize its full value over time.
Value investing focuses on such securities that are underappreciated by investors and the market at large. These stocks initially trade at a discount to their par value or fundamental value (or book value). Holders of value stocks have yet to realize the full potential of their holdings, as these stocks are considered undervalued in the stock market. As a result, the price of these stocks doesn’t fully reflect to the issuer’s prospects. The majority of value stock issuers are relatively new, emerging businesses, such as those operating technological sectors.
Value stock investing is premised on the notion that the market will recognize the stock’s true potential, and its value will pick up while making strong returns.
