What is value investing?
Value investing is an investment strategy that aims to purchase shares below their intrinsic value. In other words, these are shares that appear undervalued. In a nutshell, it works as follows: Investors try to determine the true value of a company independently. This can often be undervalued or overvalued on the stock market, due to current events such as pandemics or financial crises, for example. Knowledge of the intrinsic value of the shares or company gives value investors the opportunity to make a good deal when the shares are undervalued. This is because investors who follow the value investing strategy assume that the market will overreact to events – both positive and negative – and are always guided by the intrinsic value of shares. They try to determine this based on various financial key figures. For example, with the price/earnings ratio (P/E), the price/book ratio (P/B), the dividend yield, the debt-equity ratio, and the earnings growth.