Patience may indeed be a virtue, but when it comes to investing it seems we're all in a hurry, filled with the vices of avarice and greed. All too often, we feel that we must buy a stock rightthisminute or else the train will surely leave the station without us. Instead, we just end up on the wrong track.

Growth investors are often guilty of this investing "sin," feeling that because the stock is moving up they better climb aboard. Did True Religion Apparel (NASDAQ:TRLG) double from $4 to $8 and then double again to $16? Let's buy in! And momentum investors, well, they're simply a highly caffeinated version of growth investors. They're not even concerned with what the company does, so long as it's going up, and going up fast! Catuity (NASDAQ:CTTY) is running from $3 to $22? Better get in line as we run it up more. Just watch out below when they plummet back to earth.

The rest of us need to take care to invest not only in the right stocks, but at the right price and at the right time. Jump in too soon and we can catch the cliched "falling knife." Jump in too late and we'll indeed have missed our chance to maximize our returns. Patience is a valuable key to winning investments. And profits.

Magical elixir called "patience"
So how do we go about acquiring this mystical stuff called "patience"? Well, it certainly takes time. I think most every investor at one time or another has hastily purchased a stock, only to be burned in the process. Even though my mother used to tell me that "the burned hand learns best," I'd rather know ahead of time the right moment to buy a stock instead of walking around with blisters and bandages.

One of the primary techniques to attain patience is, quite simply, to do nothing. That's it. Don't buy. Don't sell. Don't watch CNBC. Just ignore the market and wait. Actually, you do have to do something. Use your time ignoring the market to get to know your company. Know it, understand it, value it. And once you get a good idea of what your company is worth, just wait some more.

It took me a long time to understand this principle of value investing. The stock market at times is quite exuberant and at other times quite depressed. Master value investor Benjamin Graham described it as a manic-depressive friend who is always willing to give you a price for your company. Some days he is upbeat and overvalues your stock. Other times he is downcast and undervalues it. And more often than not, he over- or undervalues your company again and again. It just takes time for him to switch moods. Just look at what happened to Elan (NYSE:ELN) after the company announced it was withdrawing Tysabri. The market pummeled it -- sending the price down close to 70% -- without taking time to consider Elan's drug pipeline or other fundamentals. Elan has since begun a slow climb back up, but it has experienced other drops along the way.

And that's why we wait. Because the stock market has been wrong in the past about the value of our company, we can be assured it will be wrong about it again in the future. If we are willing to wait -- if we are just patient -- the stock market will give us the price that we want to pay for our company.

No one knows this principle better than Philip Durell, lead analyst of the Motley Fool Inside Value newsletter service. Since he began a year ago, Philip has been patiently picking undervalued companies and just as patiently watching them beat the market as investors realize their value and bid their prices up. Since the newsletter's inception, Philip's picks are up 10.92%, more than double the market's 4.88%.

Philip has the patience to find good companies and then wait until they come down to his price before pouncing on them. For example, pharmacy services provider Omnicare (NYSE:OCR) was an early Inside Value pick, beaten down by one of the market's manic overreactions. Here was a company that had missed its own earnings estimates and lowered guidance for the full year, and the stock was rocked for a 30% drop, even though earnings were still expected to grow 20% or more in 2004. Philip's call to profit from the aging generation of baby boomers was timely, if not prescient. In less than a year, subscribers have seen their shares appreciate more than 77% as the company has scooped up competitors.

That's what happens when Mr. Market overreacts to bad news. Opportunities arise to allow savvy investors to step in. If you've priced it right, you can profit handsomely.

Catalyst for a fresh start
Yet bad news and a deflated share price don't necessarily make for a value pick. Heck, you can look at any financial paper and see stocks hitting all-time lows on a daily basis. It requires you to understand the company and what's going to change the thing that's wrong with it.

Movie rental company Blockbuster (NYSE:BBI) has been facing some tough competition from online rival Netflix (NASDAQ:NFLX). Around the time Philip was recommending online government lottery supplier GTECH Holdings (NYSE:GTK) to subscribers -- and realizing a subsequent 29% gain for them -- Blockbuster was backpedaling on its "no late fee" marketing fiasco and raising rental fees. The stock began tumbling and immediately fell more than 10% off its highs. Good time to buy, right? Not so fast! There were more revelations to come as the company missed forecasts, withdrew guidance, and suspended its dividend payments. The stock is now down more than 40% from its 52-week high -- and the pain doesn't seem to be over.

To give you an idea of how much a little bit of patience can affect your returns, consider the following:

Company Seemed low at Actual low Return since seemed low Return since actual low
Elan* $8.00 $3.24 12% 176%
Netflix* $10.03 $8.91 115% 142%
Omnicare** $33.97 $25.05 54% 109%
GTECH** $26.20 $22.29 11% 31%
*May not yet be a value.
**Denotes prior Inside Value pick.

What ingredient of success did Philip see in GTECH that others ignored? And equally important, why was it not present in Blockbuster?

In GTECH, Philip saw a company that generated a lot of cash with a new management team that appears to have both ability and integrity. Blockbuster, it seems, is unable to continue generating the cash that would allow it to weather the tough times. Its management team engages in practices that appear to shave the truth, like its "no late fee" policy. Moreover, Philip is willing to wait for the companies he likes to reach his price. Those who jumped on the Blockbuster bandwagon at $8 did so too soon, as did those who jumped in at $7. The catalyst for GTECH was a new management team and an opportunity to expand overseas. Blockbuster is still coming to grips with its finances.

Catching the exact top and exact bottom is not necessary to handily beat the market. Beating the market requires the patience to wait for the right buy-and-sell price. Doing so requires that you learn about your company, value it, and then wait for the market to give you that price as it invariably will. Moving too soon can hurt you. It may just be that value investors are really virtuous investors.

Want to join Philip and the Inside Value team on their hunt for bargain-priced stocks? Try a risk-free 30-day trial on us. In addition to receiving two value recommendations per month, you'll have access to all our back issues and our Foolish community of message boards.

This article was originally published on May 6, 2005. It has been updated.

Fool contributor Rich Duprey does not own shares of any company mentioned in this article. Netflix is a Motley Fool Stock Advisor recommendation. The Motley Fool has adisclosure policy.