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Definition of 'Value Stock'
A stock that tends to trade at a lower price relative to it's fundamentals (i.e. dividends, earnings, sales, etc.) and thus considered undervalued by a value investor. Common characteristics of such stocks include a high dividend yield, low price-to-book ratio and/or low price-to-earnings ratio.
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Investopedia explains 'Value Stock'
A value investor believes that the market isn't always efficient and that it's possible to find companies trading for less than they are worth. An easy way to attempt to find value stocks is to use the "Dogs of the Dow" investing strategy - buying of the 10 highest dividend-yielding stocks on the Dow Jones at the beginning of each year and adjusting it every year thereafter.
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The P/B ratio can be an easy way to determine a company's value, but it isn't magic!
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This method of valuing a company can make it look like a bargain when it is not.
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Learn the technique that Buffett, Lynch and other pros used to make their fortunes.
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We look at the Sage of Omaha's methodology for evaluating value stocks.
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Find out how to avoid getting sucked in by a deceiving bargain stock.
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Learn how famed investor Warren Buffett finds winning stocks.
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