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Value Investing Definition, How It Works, Strategies, Risks

Value investing is an investment strategy that involves picking stocks that appear to be trading for less than their intrinsic or book value. Investors who use this strategy believe the market has overreacted to a company's short-term challenges, causing the stock price to be undervalued. They look for stocks with strong fundamentals—including earnings, dividends, book value, and cash flow—that are selling at a price below their intrinsic value. This approach, popularized by Benjamin Graham and David Dodd in their 1934 book "Security Analysis," and further developed by Warren Buffett, focuses on long-term holding of these undervalued stocks, with the expectation that their market price will eventually reflect their true worth, leading to significant returns.

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