The Best Value ETFs Of 2024

Everybody knows that big-ticket items like televisions and laptops always go on sale, eventually. Savvy shoppers save their money and wait for the sales, rather than paying full price right now. And that’s not a bad way to understand value investing: Buying stocks on sale, only when they’re priced at a discount, then waiting for them to rise over time to match their true value.

Our analogy only goes so far, of course. Sales come pretty often, and it’s not hard to discern both the full price for the TV you have your eye on or what sort of discount makes for a great deal. Value investing is much more challenging, and it requires plenty of research and detective work to uncover which stocks are value buys and what their “true” price should be—their so-called intrinsic value.

Value investors believe the stock market overreacts to the news and events that impact individual companies. They feel that short-term developments drive moves in stock prices that don’t always reflect a company’s long-term fundamentals. Going deep to research those fundamentals—things like P/E, P/B and book value—helps value investors understand the intrinsic value of a company and see whether the current market price is in line with that value or trading at a steep discount.

For value investing, the bigger the difference there is between a stock’s intrinsic value and its current market price, the greater the opportunity. But even then, not every value stock will see its market price rebound to match what an investor believes is its intrinsic value, making value investing a tricky proposition that’s far from a sure bet in every case.