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Value Stocks

Finding value is all about buying something at a discount to what it’s actually worth. The same is true of value stocks.

Sometimes factors can cause a stock to get beaten down to the point of being undervalued. Value investing is about finding stocks that are worth more than their current share price.

Investment legends like Sir John Templeton, Benjamin Graham and Warren Buffett realized decades before behavioral finance became a respected academic discipline that systematic psychological errors tend to create market inefficiencies. Templeton, Graham and Buffett reasoned that herding behavior (including momentum traders and short-term speculators that chase price trends) and overreaction bias (the tendency of people to overreact to bad news) are strong forces in the market that can push stocks far below their fair value.

Based on these observations, many of the world’s greatest investors look for stocks that are beaten down by the market due to bad news or negative rumors. Benjamin Graham, the father of value investing, constantly searched for companies that once fetched sky-high valuations but that crashed when the companies were unable to deliver on investors’ expectations.

Warren Buffett famously said, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”

Value investing is about recognizing opportunities, spotting deep discounts and finding the next big turnaround stock. One way some investors measure a company’s value is its price-to-earnings ratio, or P/E. But P/E is a very simplistic measure of a stock’s value. Experts dig deeper, examining a company’s sales, cash flow, dividend, book value, debt levels, historical valuation patterns and more to determine if a stock is undervalued.

To help you find the next turnaround story, Cabot offers both Cabot Value Investor and Cabot Turnaround Letter. Both advisories are intended for investors who place an added emphasis on company fundamentals and undervalued opportunities.

Value Stocks Post Archives
A little known Benjamin Graham strategy for investing success is buying bonds -- and holding them -- in your investment portfolio.
New leadership and a fresh perspective led the Lions to victory over the Chiefs on Thursday night while offering a valuable lesson in turnaround investing.
Warren Buffett became the world’s greatest investor by finding undervalued stocks. These three big oil stocks look right up his alley.
Apple’s (AAPL) consumer loyalty and brand quality offer appeal to every investor, but are the shares attractive to a value investor?
Negative enterprise value stocks are hard to find. But having outperformed the market by more than 5-to-1, they’re worth hunting for.
Small-cap value stocks have been an underperforming asset class for years, but a few individual names are worthy of closer looks.
You may have seen the term “EBITDA” used in the financial media, but what exactly is it, and why do investors care?
The economic stage has been set for a new bull market, but what’s a value investor to do as growth stocks drag the indexes higher?
Growth stocks have outpaced value stocks over the last decade. But performance is cyclical - and value investing should soon win out.
The 7 biggest S&P stocks have generated nearly all the index returns; it’s time to look for value in the other 493.
The reports of shopping malls’ deaths are greatly exaggerated, and this shopping mall REIT is making a strong case for contrarian investors.
Treating year-to-date performance as if the calendar is the kickoff to a football game is a mistake. For value investors, there’s a better way.
Vodafone stock is deeply out of favor, but a recent leadership change could be a turnaround catalyst for the telecom stock.
Proxy voting is often overlooked by retail investors, but an ongoing proxy battle could help turn the tides for this out-of-favor stock.
You probably hear the term EBITDA get tossed around a lot by investment analysts. But exactly what is EBITDA, and why is it useful?