What is Value Investing?

Hi!

Value investing is the process of investing in undervalued stocks in anticipation of profits when the market price matches the intrinsic value. A comprehensive financial analysis of the company is performed to arrive at the intrinsic value, and this is compared to the market price in order to capitalize on the gap. In contrast, stock market trading just deals with the buying and selling of stocks to make a profit. This does not necessarily mean investing on value stocks, but also includes exploiting the fluctuations in market prices of any stock listed on the market.

I work at kristal.AI, and it's my passion to evaluate various upcoming investment opportunities.

Hello! Note that my answer to your question will be an over-simplification, otherwise you'll be reading a novel-length answer =)

Simply put, value investing is the investment philosophy of approaching a stock as representing partial ownership of an actual, living, breathing business. As a result, value investors rely primarily on a company's financial statements (though many value investors also assess a company's qualitative traits, such as the integrity and capability of the company's management team) to understand the intrinsic value of a business. If a company's stock price is significantly lower than its intrinsic value, that would interest value investors. Famous value investors include Warren Buffett, Benjamin Graham, and Walter Schloss.

Stock market trading, on the other hand, typically involves the use of a stock's historical price-charts to predict its future movement over short timeframes. There is a lot less emphasis placed on the study of a stock's underlying business fundamentals compared to value investing. There are many ways to do well in the stock market, but I personally find it easier to approach stocks as representing a piece of a living, breathing, business.