What is value investing and how to master it?

  • November 10, 2020 04:29 PM AEDT
  • Team Kalkine
    Team Kalkine
    admin Team Kalkine
    16957 Posts

    Team Kalkine comprises of experts who understand various markets nuances and are enthusiastic and passionate to provide best possible offerings in the form of insights and stories. The team has rich experience of working across different markets with...

Value Investing is the investment strategy wherein market players buy securities/assets trading below their intrinsic value. Value investing has always been a rational choice for investors and has stood the test of time for ages. If given proper time to play out, it can yield remarkable returns for investors.

* How to identify the next “Darkhorse”? One of the investors' favorites is the price to earnings ratio or PE ratio, which determines the price one is willing to pay per dollar of earning. A lower PE ratio is always preferred by the value buyer. Some Dividend lovers also look out for the dividend yield to gauge the value, which also garners passive income apart from capital appreciation.

* Is value still the “go-to” metric for the long-term portfolio? Through value stocks, investors try to capitalize on the inefficiency in the stock price as it may not reflect the company’s current or future performance. A perfect example of this was recently seen during the March meltdown when the stocks went berserk on their way to an intense downfall. That had created a valuation gap between the company’s worth and their stock price as the underlying businesses didn’t take as big of a hit as their respective stock prices. This was seen in the next few quarters, as the companies clearly showed signs of recovery in their numbers which was being gradually realized by the street, leading to surge in the shares demand to close the valuation gap. The result is, when the entire market cashed like anything, today a handful of companies are trading at those levels dirt-cheap levels.    

 


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