But shoppers are not the only value addicts. The search for value can be applied to almost all areas of investing, from the high-stakes world of corporate buyouts and takeovers to purchases of stocks and bonds by individuals. Value investors seek securities that seem to be underpriced relative to their intrinsic worth or future prospects. They hope that others will eventually recognize an undervalued security's true worth, causing its price to rise. When such a security appears to be fully valued, the typical value investor will sell it and search for another bargain, starting the cycle over again.
Value investing is just one of many valid investment approaches.
The following discussion may help you decide whether you would feel comfortable with it. When a stock sells at a discount, there is often a good reason, and the investor should be wary. But sometimes the discount is unwarranted, and that's where the value investing concept comes in. A stock's price may be low relative to the company's fundamentals simply because it is obscure. This is frequently true of small companies, whose stocks may not be followed by any research analysts.