A stock trading below its intrinsic value, often with low P/E and high dividend yield.
A value stock is a stock trading below its estimated intrinsic value, often identified by low P/E ratios, high dividend yields, or low price-to-book ratios. Value investors (like Warren Buffett) hunt for underpriced stocks with solid fundamentals, betting the market has mispriced them. Value stocks often come from mature, stable companies overlooked by growth-focused investors. Value stocks are less volatile than growth stocks and often pay dividends, appealing to conservative investors. Historically, value stocks have outperformed growth stocks over very long periods, though recently (2010–2020) growth stocks significantly outperformed. Value stocks perform well in economic expansions and bear markets; they underperform during growth rallies. A balanced portfolio typically includes both growth and value stocks.