Value investing is an investment strategy in which the investor seeks to invest in shares that are significantly cheaper than the intrinsic or fair value of the company. These are mainly stable, profitable companies that also pay dividends. The shares of such companies are called value shares. In most cases, it takes up to three years for the price of a value share to reach its intrinsic or fair value, and then it is time to sell.
If you systematically buy shares in good companies when they are cheap, you can achieve very good returns above the stock market average. The problem is that good companies trading well below their intrinsic value are very hard to find. If most investors consider a company's growth prospects to be good, then these prospects are already fully written into the share price. You have to look for good companies that others, for whatever reason, do not want. Value investing involves laborious fundamental analysis of a large number of companies to find a few that are good and yet undervalued.
Supervalem.ee has already done much of this analysis using the magic formula, so all that is left for the investor to do is select the right stocks from the good undervalued companies already sorted out.
