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Value Stocks

Finding value is all about buying something at a discount to what it’s actually worth. The same is true of value stocks.

Sometimes factors can cause a stock to get beaten down to the point of being undervalued. Value investing is about finding stocks that are worth more than their current share price.

Investment legends like Sir John Templeton, Benjamin Graham and Warren Buffett realized decades before behavioral finance became a respected academic discipline that systematic psychological errors tend to create market inefficiencies. Templeton, Graham and Buffett reasoned that herding behavior (including momentum traders and short-term speculators that chase price trends) and overreaction bias (the tendency of people to overreact to bad news) are strong forces in the market that can push stocks far below their fair value.

Based on these observations, many of the world’s greatest investors look for stocks that are beaten down by the market due to bad news or negative rumors. Benjamin Graham, the father of value investing, constantly searched for companies that once fetched sky-high valuations but that crashed when the companies were unable to deliver on investors’ expectations.

Warren Buffett famously said, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Value investing is about recognizing opportunities, spotting deep discounts and finding the next big turnaround stock. One way some investors measure a company’s value is its price-to-earnings ratio, or P/E. But P/E is a very simplistic measure of a stock’s value. Experts dig deeper, examining a company’s sales, cash flow, dividend, book value, debt levels, historical valuation patterns and more to determine if a stock is undervalued.

To help you find the next turnaround story, chief analyst Bruce Kaser writes the Cabot Undervalued Stocks Advisor and Cabot Turnaround Letter. Both advisories have a proven track record of handily beating the market with some of the most unloved, left-for-dead stocks on the market … right before their comeback stories begin.

To subscribe to either of Bruce’s value investing advisories, click here.

Value Stocks Post Archives
This is the secret Warren Buffett stock-picking formula that has helped investors build long-term wealth and beat the market over and over.
Each era has a cult stock or investment that becomes a symbol of the excess of the era. Applying these value metrics can help you avoid them.
Value investors have a wide variety of tools at their disposal, and estimate revisions are one way they can avoid value traps.
Macro environment aside, this SaaS stock has all the hallmarks of a future sector leader and is poised to break out when the market turns.
Instead of hiding in cash, consider shares of this discounted value stock that offers strong fundamentals and a solid yield.
Finding turnaround stocks can be tricky. Here are some common characteristics, which could come in quite handy in the current environment.
Growth has dominated value for years on Wall Street. But the tide appears to be turning, and INTC might be the best value stock out there.
Value investing has lagged growth investing for decades, but recent declines in the market are good news for contrarian investors.
Want to find return in this flat market? These two activist investor stocks look like prime turnaround candidates.
Warren Buffett became the world’s greatest investor by finding undervalued stocks. These three big oil stocks look right up his alley.
U.S. Bank is an undervalued bank stock with a conservative balance sheet and reliable earnings, which make it perfect for value investors.
VF Corporation may not be a familiar name, but you almost certainly know its brands. Is this beaten-down apparel stock a bargain?
Charlie Munger has been behind many of Warren Buffett’s biggest successes. So when he says these are his 5 favorite stocks, pay attention.
These Benjamin Graham quotes are good reminders that successful investing requires a keen eye and a steady nerve.
To answer the question, what is value investing, try to find opportunities and spot deep discounts. These criteria can help.