---
title: What is value investing?
description: "Value investing is an investment strategy where you buy stocks that are **trading at a price lower than their true (intrinsic) value**. The idea is to identify fundamentally strong companies that the market has temporarily undervalued—due to short-term events, negative…"
url: "https://arafinserv.com/fa/investment-strategies-and-concepts/what-is-value-investing/"
updated: "2025-11-20"
category: Investment Strategies and Concepts
---

# What is value investing?

Value investing is an investment strategy where you buy stocks that are **trading at a price lower than their true (intrinsic) value**. The idea is to identify fundamentally strong companies that the market has temporarily undervalued—due to short-term events, negative sentiment, or market overreaction—and invest in them with a long-term perspective.

This strategy was popularised by legendary investors like **Benjamin Graham** and **Warren Buffett**.

**Key Principles of Value Investing**

1. **Buy Low, Hold Long**
   Look for quality companies available at a discount to their intrinsic worth and hold them until the market recognises their real value.
2. **Strong Fundamentals**
   Value investors focus on companies with:
   - Stable earnings
   - Low debt
   - Strong cash flows
   - Competitive advantages (moats)
3. **Margin of Safety**
   You invest only when the price is significantly below the intrinsic value, which reduces risk and increases potential return.
4. **Contrarian Approach**
   Value investing often involves buying when others are fearful or ignoring a stock—making patience and discipline essential.
5. **Long-Term Mindset**
   It may take months or years for undervalued stocks to appreciate, so value investors don’t react to market noise or short-term volatility.

**Why Value Investing Works**

- Markets can misprice stocks in the short term
- Emotion-driven selling creates opportunities
- Quality companies tend to recover strongly once fundamentals assert themselves

**Value Investing vs Growth Investing**

- **Value:** Buy undervalued, stable companies at attractive prices
- **Growth:** Buy high-potential companies expected to grow earnings rapidly

Both have their place, but value investing is preferred by investors seeking stability, strong fundamentals, and long-term wealth creation.