Value Stock
A value stock trades at a discount to its intrinsic value based on fundamental metrics.
Value investors look for companies trading below what they calculate the business is worth — low P/E, low P/B, high dividend yield relative to sector peers, or simply a business temporarily out of favour with the market.
Value investing, codified by Benjamin Graham and refined by Warren Buffett, has historically outperformed growth investing over very long periods, though the relationship inverted sharply in the decade to 2021 as technology dominated.
The risk in value investing is the 'value trap' — a stock that looks cheap because the business is in structural decline, and gets cheaper still as earnings continue to fall.
Further Reading
Peter Lynch on how everyday investors can spot winners before the professionals do.
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Check Price →Morgan Housel's short lessons on behaviour, luck and long-term wealth.
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Recommended Reading & Tools
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Benjamin Graham's classic on value investing — the book Warren Buffett calls the best ever written on the subject.
Check Price →Keep budgets, portfolios and goals in one place with a dedicated finance planner.
Check Price →JL Collins' plain-English guide to index investing and financial independence.
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