The Basics of Value Investing Strategy

Learn how investing in value stocks can make you richer.

By Rachel Warren – Updated Jun 25, 2025 at 5:44 PM | Fact-checked by Frank Bass

Key Points

Value investing targets underpriced stocks to hold until their market recognition increases.
Look for a margin of safety in stocks, ideally 20% or more, to minimize risk.
Use stock screeners to find low P/E and P/B ratios and compare with intrinsic values.

Value investing involves buying stocks that are priced below their fair value. The investor's goal is to hold these assets until the broader investment community realizes their true value. When that happens, the value stock's price will rise and create gains for the investor.

Stocks can be underappreciated and underpriced for several reasons. The company may be working through a temporary issue that is causing lower sales and earnings, the industry or individual stock may be out of favor with investors, or the overall economy could be down.

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An infographic defining and explaining the concept of value investing. — Image source: The Motley Fool.

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An infographic comparing the similarities and differences between growth and value investing. — Image source: The Motley Fool.

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More informed and wealthier through value investing

Value investing requires patience. As economist John Maynard Keynes said, "The market can remain irrational longer than you can remain solvent." While you can occasionally get lucky on timing and realize gains quickly, this is the exception and not the norm -- particularly when investing in value stocks. Practically speaking, the investment community is usually slow to reprice stocks that have fallen out of favor.

Value investing is also time-intensive in the short term. But the effort has its rewards. Understanding and applying value investing concepts is an instructive process. You'll refine what qualities make a stock investable, and you'll have deep knowledge of the companies you choose to add to your portfolio. In short, you'll be a more informed investor -- which should make you wealthier, too.

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About the Author

Rachel Warren is a contributing Motley Fool stock market analyst covering pharmaceuticals, biotechnology, medical devices, information technology, and consumer goods. Prior to The Motley Fool, Rachel was a paralegal and legal administrator. She holds a bachelor’s degree in paralegal studies from Liberty University School of Law.

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Rachel Warren has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.