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What is Value Investing Strategy?

Welcome to the Investors Trading Academy talking glossary of financial terms and events. Our word of the day is “Value Investing Strategy” The main aim of the value investing strategy is to identify stocks with a high intrinsic value which has not yet been reflected in the pricing of the stock in the market. These stocks are known to be ‘undervalued’. These stocks tend to have good fundamentals and stable performance. Unfortunately, they tend to be in unexciting industries which investors overlook and end up overshadowed by stocks that grow quickly or give high dividends. These stocks tend to be underpriced by the market. Value investors believe that the true value of these stocks will have a chance to be reflected in the market in the future. These are gems waiting to be discovered. Fu Yu is a good example of such a stock. Value investors do not have to time the market as they tend to look for stocks that are already undervalued at the point of investment. There is no need for value investors to frequently monitor the price movement of a stock. Value investing may not be suitable for investors who want to see results fast. The time required for the stock to show its full potential may be too long for some investors. Typically, a lot of research have to be done in order to sieve out the stocks which are truly undervalued from the rest of the stocks. Many investors who have tried and failed at value investing are unable to get the research process right. Thus leading to the purchase of junk stocks whose prices will never increase much. By Barry Norman, Investors Trading Academy - ITA