If you’ve been an active investor in the stock market, you would have heard of value investing–an investment approach that seeks to profit from identifying undervalued stocks.
If you’ve been an active investor in the stock market, you would have heard of value investing–an investment approach that seeks to profit from identifying undervalued stocks.
Value investing is based on the idea that each stock has an intrinsic value, i.e. what it is truly worth.
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Value investing is based on the idea that each stock has an intrinsic value, i.e. what it is truly worth.
Value investors calculate the intrinsic value of a company by using fundamental analysis. They arrive at a per-share estimate of intrinsic value. Then they compare this estimate with the stock price.
If the stock price is lower than the intrinsic value they buy the stock. If the stock price is higher than the intrinsic value, they sell the stock.
The idea in value investing is to buy stocks that trade at a significant discount to their intrinsic values, usually more than a 20% discount. So, if the estimated intrinsic value is ₹100 per share, value investors will buy it only if the stock is trading below ₹80.
They make a profit once the stock price rises above the intrinsic value of the company.
This is why value stocks are also called cheap stocks, in terms of valuations. They usually trade at low price to earnings, i.e., a low PE ratio and a low price to book, i.e., low PB ratio.
So which stocks are trading cheaply today? These well-known stocks are flying under the radar of investors when the Nifty is close to its life highs.
#1 Power Finance Corporation
Power Finance Corp (PFC) maharatna (schedule-A) Government of India…
Read More: Value investing gems: 5 underrated stocks flying under the radar