• UGI USER
  • Dec 19, 2023
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UNDERSTANDING VALUE INVESTING: PROFITS THROUGH DISPARITY

What is Value Investing?

  • Value investing involves buying assets like stocks, bonds, or real estate below their intrinsic value, aiming to sell at a profit later.
  • Investors believe asset prices will move towards intrinsic value over the long run, offering opportunities for both buying undervalued assets and shorting overvalued ones.
  • Benjamin Graham, the father of value investing, laid the foundation, and Warren Buffett is a prominent advocate.

How it Works?

  • Based on the premise that an asset’s market price can deviate significantly from its intrinsic value.

For instance:

If a stock’s intrinsic value is ₹100 per share but trades at ₹60, value investors seize the opportunity to buy below intrinsic value.

  • Over time, as more investors recognize the gap, the asset’s price rises, allowing value investors to sell for a profit.

Judging Intrinsic Value

  • Varying opinions on intrinsic value create opportunities for contrarian investors.
  • Value investors seize buying chances during crises with panic selling.
  • Value investing emphasizes exploiting price-intrinsic value gaps, unlike growth investing solely focused on earnings growth.