UK Accounting Glossary
Value investing is an investment technique where one buys shares that are believed to be undervalued in hopes that the true (higher) value of the stock will be realized. Therefore, value investing requires more of a long-term outlook. Someone who believes the market overreacts to good and bad news, which can cause stocks to be traded at less than they’re worth, might be more prone to value investing. Those who engage in value investing get out when they think the market has corrected the price. To determine if a stock is undervalued, investors who opt for value investing typically look for low price-to-earnings ratios and low price-to-book values. Value investing is not as focused on technical analysis as it is on the stock’s fundamentals. This means that value investing examines the stock’s current market value and the company’s intrinsic value.
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This glossary post was last updated: 5th February 2020.