Value investing is the only strategy that has reliably beaten the market for nearly a century. Pioneered by Benjamin Graham on the heels of the Great Depression, value investing is based on a simple concept: Buy shares in undervalued companies, then wait for the market to wake up and bid the shares back up to fair value.

In theory, it's easy. In practice ... not so much. See, "value stocks" are typically value-priced for a good reason.

A crumbling foundation
Let's look at housing industry stocks for an example. With new home sales plummeting, as well as the subprime meltdown and subsequent credit crunch, homebuilders, lenders, and other housing industry stocks are hated right now. And if you read the headlines, you can see why:

Company

Date

Headline

Toll Brothers (NYSE:TOL)

9/10/2007

Moody's Sees Housing Slump Until 2009

Hovnanian (NYSE:HOV)

9/13/2007

Hovnanian Cuts Prices as Home Sales Cool

Washington Mutual (NYSE:WM)

9/13/2007

Washington Mutual to Cut 1,000 Jobs

Countrywide (NYSE:CFC)

9/13/2007

Countrywide's Loans Slipped Last Month

Lowe's (NYSE:LOW)

9/14/2007

Big-Box Blues

These stocks have been huge disappointments over the past year. And while some folks believe they will plummet further, legendary fund manager Bill Miller, for one, remains unconvinced.

Miller's fund holds 3% of its assets in Countrywide, and another 2% combined in Pulte (NYSE:PHM) and KB Homes (NYSE:KBH). "We've been wrong to own them for the past year and a half," Miller told Bloomberg News. "But if we didn't own them now, we would be buying them like crazy."

So ... time to buy?
Miller made his reputation with a contrarian value strategy, and although he strayed from that in recent years, his opinions deserve to be heard. Because unless you believe the Chicken Littles of the world that the sky is falling, the challenging business environment these housing firms face now will eventually stabilize and improve.

That may not be tomorrow, or even by the end of 2007. But long-term investors won't forget that people still need to live somewhere. That means they'll need to buy homes, finance the purchase of those homes, and fix up those homes.

Of course, there's always a gap between the times things look their worst and when they look good again, so when you invest this way, you need to be prepared to be early. That means weathering volatility -- and even buying more -- on the way to a rebound.

Exploit our biggest weakness
At Motley Fool Inside Value, we're not immune to the risk of buying our value stocks early. By following in Graham's footsteps, we've stayed ahead of the market since our 2004 inception. Even so, several of our picks have fallen after we've selected them.

Quite often, our members can buy the very same value-priced companies -- after we recommend them -- for an even lower cost basis. If you'd like to see all of our recommendations, including our top-five picks for new money (one of which is in the housing market), you can do so with no obligation to subscribe with a free, 30-day trial.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of Lowe's and Washington Mutual. Washington Mutual is a Motley Fool Income Investor selection. The Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.