Value investing involves attempting to identify and then buy a stock whose price you believe to be undervalued. When you’re right, you’ve in effect bought that stock at a discount.

This long-term investment strategy is based on deep analysis of a company’s characteristics and potential. Value investors might study metrics including price-to-earnings ratio, cash flow, competitive advantage, target market, and business model.

Value investors look for opportunities born out of investor overreactions. They believe that investors are prone to making emotional decisions based on good or bad news and attempt to take advantage of a dip in stock price.

Value investments can perform differently from the market as a whole.  They can remain undervalued by the market for long periods of time.