- “Value stocks” describes an investing strategy that looks for companies currently trading below what they’re really worth.
- Unlike dividend stocks, small cap stocks, or a growth stocks, which all tend to stay what they are, value stocks can move in or out of being “value stocks.”
- Over 100 years of extensive research has shown that buying value stocks is one the best strategies for making money and beating the market. Over time, it has consistently outperformed most other investing strategies.
- We walk through a step-by-step guide to finding the best value stocks, including screenshots and direct links to a stock screener that’s pre-filtered for high-potential value stocks.
Building on our previous lesson about growth stocks, today we’re going to cover four important questions about value investing:
- What are value stocks?
- What should you know about investing in value stocks?
- Which value stocks perform best?
- How do you find the best value stocks to buy? (A step-by-step guide)
What Are Value Stocks?
What exactly is a value stock?
“Value stocks” describes an investing strategy that looks for companies currently trading below what they’re really worth.
In other words, value investing tries to buy good stocks on the cheap.
There’s no strict definition of what makes a company a value stock, and technically any company could be a value stock at any time.
For example, if a stock had a fair value of roughly $100 per share, but was trading for $120 per share we would call it “overvalued.” However, if the very next day the stock sold off by 33% so it was now priced at $80, you could definitely call it a value stock
This is a very important point…