Value Investing
Buy assets trading below your estimate of their intrinsic worth, and wait.
How it works
Value investing buys assets that look cheap relative to fundamentals: earnings, cash flow, book value, or assets. The premise, rooted in Graham and Dodd, is that markets over-punish out-of-favor companies, creating a 'margin of safety' between price and intrinsic value that eventually closes. Investors do bottom-up analysis of balance sheets and business quality, then hold patiently for the market to re-rate the stock. It is inherently contrarian, requiring you to buy what others are selling. As a factor, cheapness is measured with ratios and applied across a diversified basket rather than a single deep-dive, but the underlying bet is the same.
The trade-offs
✅ Strengths
- Long, well-documented historical premium over decades
- Margin of safety cushions downside
- Forces disciplined, fundamentals-based thinking
⚠️ Weaknesses
- 'Value traps': cheap stocks that stay cheap or go bankrupt
- Can underperform growth for a decade-plus (e.g. 2010s)
- Requires painful patience and contrarian conviction
Publicly associated with
Naming a practitioner is historical, educational context — never an endorsement.
Legends who play this way
Play the Value Investing style in Conviction League
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