Value investing involves buying a stock that you think is undervalued and could possibly rise in value in the future, and holding it for a long period of time. This gives the company a chance to grow, manage its cash flow and provide promising balance sheets for the future, which are all aspects of fundamental analysis.
Share prices often fluctuate after a news report or balance sheet is released, which can affect market sentiment for a particular company. Whereas short-term traders focus on these movements and aim to profit from small price discrepancies, value investors focus on longer-term trends and company fundamentals. They ignore most aspects of technical analysis and instead pick stocks based on quality and potential for the future. Learn how to pick stocks.
Value investors tend to wait until a share’s price is below its intrinsic value before buying. This is essentially to get it at ‘discount’ price.