Keyword: Value Investing

Value investors look for companies they can buy for less than their estimate of present value. That estimate often uses financial-statement criteria such as book value, sales, cash flows or earnings. Value investors may look further for hidden value such as management ownership of a company’s stock, patents or special market niches for a company’s products. They may even look at what a company is worth in a possible takeover. A value fund manager will tend to have a portfolio of companies that trade at below-average price/earnings and price/book value ratios. What’s more, many companies in value portfolios pay higher-than-average dividends. (See also Momentum Investing and Sector Rotation Investing.)

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Value vs growth stocks

Underpriced slower-growing companies are often better investments than overpriced fast-growing companies. In other words, value investing often pays more than growth investing.                  
Jeremy Siegel is a professor   Read More