Value stocks are shares in a company that is trading at a lower price in the stock market than what it is worth.
- Value stocks are shares in a company that trade at levels lower than the company fundamentals (i.e. earnings, dividends, sales, etc.).
- A bargain price is characteristic of a value stock in the stock market
- Value stocks are appealing to investors as they view the company as unfavourable for the marketplace and enjoy its prices that are lower than market values
What is a value stock?
A value stock is a share in a company that is appealing to investors because it trades at a bargain price relative to what the company is worth (i.e. earnings, dividends, sales). The idea behind investment in these stocks is that the market is inefficient at valuing the company’s actual worth.
The market’s skepticism towards value stocks is what keeps value investors interested at a bargain price. This skepticism normally stems from bad news, seasonal nature of business, bear markets, etc. In order to profit from a value stock, the market must change its perception of the company.
A skeptical market means that value stocks are intended for investors that have larger risk appetites. Due to the higher risk that these stocks pose, value investors are more likely to benefit from a greater return in the long run.
Where can I learn more?
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