Strategy Intermediate: Value Investing

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1.
A value stock is one that is undervalued in the marketplace.
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True. A value stock is worth more than its current market price indicates.
2.
A low price-to-book (P/B) ratio means _______.
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Less than 1. Mathematically, it means less than 1.
3.
Value investing is about measuring a companys past performance, not forecasting its future profits.
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False. Value investing is about measuring a companys capacity and potential for growth.
4.
A value stock is issued by a company that _______.
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Has the resources to grow. A careful review reveals that it will likely grow in the future, even during economic downturns.
5.
Which of the following best suggests that the price of an undervalued stock may soon increase?
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A corporate takeover is imminent. An investor may expect the takeover announcement to push up the price of the undervalued stock.