Value Investing

What is Value Investing? — Definition

Value investing was pioneered by Benjamin Graham and David Dodd in their landmark 1934 book 'Security Analysis' and later popularized by Graham's 'The Intelligent Investor.' The core philosophy: markets are not always rational. Stocks are sometimes priced far below (or above) their fundamental worth due to fear, neglect, or speculation. Patient investors who identify and buy undervalued stocks earn superior returns over time.

Warren Buffett, Graham's most famous student, refined the approach by focusing not just on cheapness but on the quality of the underlying business. His famous framework: buy 'wonderful companies at fair prices' rather than 'fair companies at wonderful prices.' Other legendary value investors include Charlie Munger, Seth Klarman, and Howard Marks.

Example

In 2009, Bank of America stock fell to around $3 per share during the financial crisis. Warren Buffett invested $5 billion in preferred shares with a 6% dividend. By 2017, Buffett's investment had generated over $12 billion in total returns — classic deep value buying during maximum fear.

Value investing principles underpin every research report published in BMInsider's 100X Insider Reports, and tracking smart money allocations in our Smart Money Tracker reveals how the world's best value investors are positioning today.