A stock that is issued by a company at a share price lower than its fundamental value. It is a stock of a public company (publicly traded company) that allows a holder (buyer), i.e., a value investor, to pay a reduced price now in order to realize its full value over time.
Value stocks initially trade at a discount to their par value or fundamental value. Holders of value stocks have yet to realize the full potential of their holdings, as these stocks are considered undervalued in the stock market. As a result, the price of these stocks doesn’t fully reflect to the issuer’s prospects. The majority of value stock issuers are relatively new, emerging businesses, such as those operating technological sectors.
Buying value stocks is broadly part of a strategy known as value investing. Value stock investing is premised on the notion that the market will recognize the stock’s true potential, and its value will pick up while making strong returns.
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