Value investors want to buy stocks for less than they're worth. If you could buy $100 bills for $80, wouldn't you do so as often as possible?
Even high-quality companies with strong fundamentals see share prices fall when the overall stock market drops. Plus, value stock companies tend to be well established and less volatile than growth stock companies.
Here's an overview of value stocks, including some excellent beginner-friendly value stocks and key concepts and metrics that value investors should know.
Top value stocks
4 best value stocks for beginners
Value stocks are generally publicly traded companies trading at cheap valuations relative to their earnings and long-term growth potential. Let's look at four excellent value stocks: Berkshire Hathaway (BRK.A 1.26%) (BRK.B 0.93%), Target (TGT 0.9%), General Motors (GM 8.68%), and Signet Jewelers (SIG 0.43%). Then, we'll dive into some metrics that can help you find the best value stock investments.
1. Berkshire Hathaway
Berkshire Hathaway is a unique company on the stock market and has long been a top choice for value investors, largely because longtime CEO Warren Buffett is the world's most admired value investor, and his investing acumen is the biggest reason for the company's success.
Since Buffett took over in 1964, Berkshire Hathaway has grown into a conglomerate with more than 60 wholly owned businesses and a massive stock portfolio with almost more than 40 different holdings.
Berkshire has steadily increased its book value and earnings power over time. It operates under the same business model that has led the stock to almost double the annualized return of the S&P 500 index for more than 55 years. That track record is unmatched and will probably never be beaten.
Buffett and his late business partner, Charlie Munger, kept large cash reserves to deploy when they spotted an opportunity as part of their value investing strategy. He's also been content to own companies outright that can generate profit and don't need to grow, using those profits to fund stock purchases and new acquisitions, a unique strategy in the stock market. Wholly owned subsidiaries like See's Candies, Dairy Queen, and Brooks running shoes are all good examples of cash-flowing stable businesses that don't need to go grow to contribute to Berkshire's business model. Buffett's value investing approach also explains why he favors sectors like insurance, which provides a "float" in the form of premiums that he can reinvest.
Buffett announced at Berkshire's annual shareholder meeting in May 2025 that he would step down by the end of the year, passing the reins to Greg Abel, who is currently CEO of Berkshire Hathaway Energy.
As of the end of the first quarter, Berkshire had almost $350 billion in cash and equivalents on its balance sheet, putting it in a good position to make an acquisition if it finds one attractive. Additionally, the company could pay a dividend. Abel is expected to run the business with a value-oriented mindset similar to Buffett's.
One sign that even value stocks are getting expensive is that Berkshire was a net seller of stocks in 2024, signaling that Buffett believes the market is overvalued. Stocking up on dry powder is another smart strategy of value investors like Buffett, and it will likely pay off if stocks pull back again as they did at the beginning of 2025.
2. Target
Target is one of the largest retailers in the U.S., one of only a handful of national multi-category retailers, along with Walmart (WMT -0.27%), Costco (COST -0.04%), and Amazon (AMZN 0.23%). The company has been a steady engine of growth throughout most of its history and has a wide reach for a brick-and-mortar retailer, operating in urban, suburban, and rural locations, and stores in all 50 states.
However, Target has struggled in recent years due to weak consumer discretionary spending, inventory fluctuations, and internal issues like theft. It's also faced a customer backlash due to changes in its DEI policies, which may have contributed to a weak first quarter in 2025. As a result, the stock traded at a price-to-earnings (P/E) ratio of 11.4 as of July 2025.
That's a great price to pay for a retailer with differentiated positioning and one that's still opening new stores. Target is also a Dividend King with a dividend yield of 4.6%, offering a reward to income investors.
Target still has a long-term growth opportunity in retail, both through new stores and e-commerce. This includes its range of same-day fulfillment options, such as curbside pickup, known as Drive Up, and same-day delivery through Shipt.
Target stock has fallen for a number of reasons, but its challenges are fixable. The company expects to grow sales by a total of 15% over the next five years, and at its current valuation, the stock looks like an easy winner if it can accomplish that goal. While its recent results have been disappointing, Target is the kind of value stock that offers value because of its turnaround potential.
3. General Motors
Valuation is arguably the most important test of a value stock, as a value investor is ultimately looking to buy a stock worth more than its price. As Buffett has said, "Price is what you pay. Value is what you get."
On that account, General Motors (GM) is one of the best value stocks around. GM has been a leading player in the auto industry for a century and continues to be one of the world's largest automakers.
Based on its adjusted earnings per share, GM currently trades at a P/E ratio of less than 7, a reflection of investors' low growth expectations and uncertainty around tariffs and trade, which is expected to weigh on results this year. However, GM has continued to deliver solid results, and it should benefit from slowing growth in electric vehicles (EVs), even though it has a number of them on the market.
The company announced in late 2024 that it would end its Cruise autonomous vehicle business, which had cost it an estimated $10 billion over its history. Investors responded positively to the move because it will help GM's cash flow. Concerns about tariffs have also pushed the stock lower, but it's unclear how the import taxes will affect the business since higher car prices could be good for GM, or at least for its American-made inventory. A recent hike in steel tariffs to 50%, however, is expected to be a hardship for GM and its peers.
As a value stock, GM is also able to aggressively repurchase stock to lift its earnings per share (EPS). It has reduced shares outstanding by almost one-third over the last 18 months. That's one way value stocks can grow profits even without growing revenue.
4. Signet Jewelers
Signet Jewelers is the world's largest diamond jewelry retailer. With a market cap of just $3 billion, it's much smaller than any of the other stocks on this list, but value stocks come in all sizes.
Signet operates in a mature industry, and the stock has historically traded at a discount because investors regard it as a low- or no-growth company. There also seems to be some concerns about disruption from lab-grown diamonds, though Signet is benefiting from that segment, as well.
The company has made some smart moves, including reducing its real estate footprint, investing in higher-margin service businesses like repair and warranties, and focusing on its largest brands, including Kay, Jared, and Zales.
Based on adjusted earnings per share, Signet trades at a price-to-earnings (P/E) ratio of just 9, and the company has also taken advantage of that discount to buy back stock. In the first quarter of 2025, it repurchased 5% of shares outstanding after the stock fell sharply, and itsshares outstanding have fallen by roughly half over the last decade.
Definition
What are value stocks?
Most stocks are classified as either value stocks or growth stocks. Generally, a value stock trades for a lower price than its financial performance and fundamentals suggest it's worth. A growth stock is a company expected to deliver above-average growth compared to its industry peers or the overall stock market.
Growth Stock
Some stocks have both attributes or fit in with average valuations or growth rates, so whether they are value stocks depends on the number of pertinent characteristics they possess. Value stocks generally have the following characteristics:
- They are typically mature businesses.
- They have steady (but not spectacular) growth rates.
- They report relatively stable revenues and earnings.
- Most value stocks pay dividends, although this isn't a set-in-stone rule.
Some stocks easily fit into one category or the other. For example, package delivery giant FedEx (FDX 2.68%) is clearly a value stock that's fallen out of favor with Wall Street due to some short-term challenges. Conversely, fast-moving Tesla (TSLA 0.19%) is an obvious example of a growth stock.
On the other hand, some stocks can fit into either category. For example, there's a case to be made either way for tech giants Apple (AAPL -0.14%) and Microsoft (MSFT 0.05%), though their valuations may be a little too stretched currently to be seen as value plays.
Regardless of a stock's category, economic downturns present an opportunity for a value investor. The goal of value investing is to scoop up shares at a discount, and the best time to do so is when the entire stock market is on sale.
Finding them
How to find value stocks
The point of value investing is to find companies trading at a discount to their intrinsic value, with the idea that they'll likely outperform the overall stock market over time. However, finding undervalued stocks is easier said than done. That said, here are three of the best metrics to keep in your toolkit as you search for a bargain:
- P/E ratio: This is the best-known stock valuation metric -- and for good reason. The P/E ratio can be a very useful tool for comparing the valuations of companies in the same industry. To calculate it, simply divide a company's price per share by its past 12 months of earnings per share.
- Price-to-earnings-to-growth (PEG) ratio: This is similar to the P/E ratio, but the PEG ratio adjusts to level the playing field between companies that might be growing at slightly different rates. By dividing a company's P/E ratio by its annualized earnings growth rate, you get a more apples-to-apples comparison between different businesses.
- Price-to-book value (P/B) ratio: Think of the book value as what would theoretically be left over if a company stopped operations and sold all its assets. Calculating a company's share price as a multiple of its book value can help identify undervalued opportunities, and many value investors specifically look for opportunities to buy stocks trading for less than their book value.
Value investors
Value investors
Long-term investors can generally be classified into one of three groups:
- Value investors try to find stocks trading for less than their intrinsic value by applying fundamental analysis.
- Growth investors try to find stocks with the best long-term growth potential relative to their current valuations.
- Investors who take a blended approach do a little of each.
Buffett is perhaps the best-known value investor of all time. From the time he took control of Berkshire Hathaway in 1964 to the end of 2024, the S&P 500 generated a total return of 31,223%. Berkshire's total return during the same period has been a staggering 5,502,284% (that's not a typo).
Although he isn't as well-known as Buffett, Benjamin Graham is often referred to as the father of modern value investing. His books, The Intelligent Investor and Securities Analysis, are must-reads for serious value investors. Graham was also Buffett's mentor.
Related investing topics
The power of value stocks
Don't underestimate the power of value stocks
While they might not be quite as thrilling as their growth stock counterparts, it's important to realize that value stocks can have just as much long-term potential as growth stocks, if not more. After all, a $1,000 investment in Berkshire Hathaway at the beginning of 1965 would be worth more than $28 million today. Finding companies that trade for less than they are truly worth is a time-tested investment style that can pay off tremendously.
FAQ
Investing in value stocks FAQ
What is a value stock?
A value stock is one that trades for a lower price than its financial performance and fundamentals suggest it's worth.
What are value stocks vs. growth stocks?
Value investing and growth investing are two different investing styles. Value stocks usually present an opportunity to buy shares below their actual value, while growth stocks exhibit above-average revenue and earnings growth potential.
Wall Street likes to neatly categorize stocks as either growth or value stocks. The truth is a bit more complicated since some stocks have elements of both value and growth. Nevertheless, there are important differences between growth and value stocks, and many investors prefer one investing style over the other.
What are value stock ETFs?
An exchange-traded fund (ETF) that invests in value stocks uses specific criteria to find companies whose intrinsic values substantially exceed the market values implied by their stock prices. By investing in a wide range of undervalued companies, value stock ETFs confer instant portfolio diversification. Buying shares in a value stock ETF can be a safe and easy way to invest in companies in cyclical industries.
How do I start value investing?
Value investing requires a great deal of research. You'll have to do your homework by going through many out-of-favor stocks to measure a company's intrinsic value and comparing it to its current stock price. You'll often have to look at dozens of companies before finding a single one that's a true value stock.
What are the risks of investing in value stocks?
The biggest risk of investing in value stocks is that you invest in a "value trap." This is a stock that looks cheap, but it's cheap because the company is declining. Typically, owning shares of a declining company is a recipe for losing money in the stock market.
What are some strategies to invest in value stocks?
To find value stocks worth buying, it's a good idea to start with some stock screens to find stocks trading at low P/E ratios or low valuations, according to other metrics. However, that alone isn't sufficient.
It's a good idea to do a discounted cash flow valuation to see if the stock is trading for less than the present value of its future cash flows. While it's impossible to predict future cash flows, the exercise should help give you a sense of whether the stock offers value or not.
What is a good P/E ratio for a stock?
A good P/E ratio for a stock depends on multiple factors. It's more than just looking at a number.
To understand if a stock has a good P/E ratio, it's a good idea to compare it to the S&P 500 and to its peers. If it's growing faster than its peers and trades at a lower or even equal P/E ratio, for example, that's a good sign that the stock is a good value.
A P/E ratio under 10 would generally be considered cheap, but that's different from offering value since the number alone doesn't tell you enough about the company without looking at its financial performance.
