Definition
Value Investing
Value investing is a style of buying stocks that trade below their intrinsic worth, betting the market will eventually recognise their true value.
Pioneered by Benjamin Graham and practised by Warren Buffett, value investing seeks undervalued companies, often those with low P/E, low P/B, or out of favour, and buys them with a margin of safety. The approach is patient and contrarian by nature.
Value investors do deep fundamental analysis to separate cheap-but-good businesses from cheap-and-deteriorating 'value traps'. In India, value strategies shine when overlooked sectors (PSUs, cyclicals) re-rate, but require discipline to wait out long periods of underperformance.
Related terms
- Margin of SafetyMargin of safety is the practice of buying a stock at a meaningful discount to its estimated intrinsic value to protect against errors and bad luck.
- Growth InvestingGrowth investing focuses on companies expected to grow earnings and revenue much faster than average, even if their valuations look expensive today.
- Contrarian InvestingContrarian investing means going against the crowd, buying what others are fearfully selling and selling what others are greedily buying.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.