Value Investing

Value investing is investing in a stock at an undervalued price through solid fundamental analysis, knowing what the true value of the stock is and investing based on due diligence and not market sentiment.

Benjamin Graham and Warren Buffet are the most notable figures utilising that of “value investing, simply put value investing is purchasing a security or business at a price below its intrinsic value.

Benjamin Graham always took the position that value investment was the only real form of investment; anything else was speculation. Value investing generally takes the form of some sort of fundamental analysis, therefore looking at security’s which are trading below book value, or have high dividend yields, strong cash flow, P/E ratios and so on.

One of the key requirements of value investing is knowing the intrinsic value of a security. The objective of value investing is purchasing a security at a discounted or reasonable price. Value investors are usually long term investors and generally ignore day to day price fluctuations mainly due to the fact that in the stock market the stock price will inevitably change on a day to day basis but the company fundamentals generally stay the same.

Value investing comes down to purchasing a security for less then what is it actually worth, again emphasis on intrinsic value. There are value investors who look at present assets/earnings and place no value on future growth and value investors who build a strategy around estimation of future growth and cash flows. Either way it comes down to the fundamentals of the company and investing into a solid company at an undervalued price.