Value investors are bargain hunters and many investors describe themselves as such. But who is a value investor? We argue that value investors come in many forms.
- Some value investors use specific criteria to screen for what they categorize as undervalued stocks and invest in these stocks for the long term.
- Other value investors believe that bargains are best found in the aftermath of a sell-off and that the best time to buy a stock is when it is down.
- Still others adopt a more activist approach, where they buy large stakes in companies that they believe are undervalued and push for changes that they believe will unleash this value.
Value investing is backed by empirical evidence from financial theorists and by anecdotal evidence—the success of value investors like Ben Graham and Warren Buffett are part of investment mythology—but it is
not for all investors. Investors need to consider what they bring to the table to succeed at value investing.