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![http://profitableinvestingtips.com/profitable-investing-tips/what-is-value-investing
[Value investing is t]he strategy of
selecting stocks that trade for less
than their intrinsic values.](https://image.slidesharecdn.com/what-is-value-investing-160509212808/85/What-Is-Value-Investing-6-320.jpg?cb=1464891333)
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What Is Value Investing?
http://profitableinvestingtips.com/profitable-investing-tips/what-is-value-investing What Is Value Investing? Investment gurus often talk about value investing. What is value investing and is it a profitable approach to building your retirement nest egg or simply getting rich? Here is what Investopedia says about value investing. [Value investing is t]he strategy of selecting stocks that trade for less than their intrinsic values. Value investors actively seek stocks of companies that they believe the market has undervalued. They believe the market overreacts to good and bad news, resulting in stock price movements that do not correspond with the company’s long-term fundamentals. The result is an opportunity for value investors to profit by buying when the price is deflated. Typically, value investors select stocks with lower-than-average price-to-book or price-to-earnings ratios and/or high dividend yields. A simple approach to value investing is to use a stock screening tool like the one in Google Finance to find stocks with low price to earnings ratios (P/E ratio) or price to book ratios and high dividends. However, finding a list of such stocks is only the beginning. How Does the Company Make Its Money? The famous investor Warren Buffett says that he only invests in a stock when he has a clear idea of how the company makes its money how it will continue to do so for the indefinite future. Buffett invests in blue chip companies such as Wells Fargo & Co, Coca Cola Co, Kraft Heinz Co, American Express Co and U.S. Bancorp. These are his biggest holdings. Buffett is considered the most successful investor in history and is the third richest man in the world. Business Insider notes that if you had invested $1000 in his company, Berkshire Hathaway, when he took it over in 1964 your shares would be worth about $11.6 million today. That is a ten thousand fold return on investment with the guru of value investing.
