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A value stock is a stock that is currently selling for a price believed to be lower than it should be selling for.
Things To Know
- Investors who buy value stocks believe these stocks will soon experience a value correction in the market.
More about value stocks and value companies
Companies that have good earnings, growth potential or other signals of strength but whose stock prices do not reflect this are considered value companies. Both the market and investors may be largely ignoring their stocks. Investors who buy value stocks believe that these stocks are only temporarily out of favor and will soon experience a value correction in the market. Factors such as new management, a new product, or operations that become more efficient may make a value stock grow quickly.
Many companies alternate between value and growth—it is a part of the business cycle. Value stocks are attractive to investors who watch markets carefully for undervalued stocks they feel will move upward.
Learn more about the risks of value stocks.