Three stocks that pass the value investing test

Résumé détaillé

Value investors calculate a company's intrinsic value using fundamental analysis. These three companies should be on every value investor’s radar.

‘The stock market is a device for transferring money from the impatient to the patient.' : Warren Buffett

The stock market is not a place for speculators and gamblers. Those who don’t understand the fundamentals of the listed companies they’re trading in will end up losing money.

So, it should be no surprise to hear the old stock market saying that more than 90% of traders lose money in the long term. We would go further and say that most of the remaining 10% don't make enough for a good lifestyle.

But it’s not a reason to be disappointed. There is a way to create significant wealth in the stock market in the long term. The method is value investing.

The key to long-term wealth creation is finding value stocks and holding on to them for the long term.

In this editorial, we explain the steps to apply the principles of value investing and highlight three stocks from Equitymaster’s Stock Screener: Top Value Stocks in India.

The idea is to buy stocks that trade at a significant discount to their intrinsic values – they are cheaper than their true value. Once you buy an undervalued stock, the stock price eventually rises towards its intrinsic value and makes a profit for you in the process.

Value investors calculate a company's intrinsic value using fundamental analysis. They arrive at a per-share estimate of intrinsic value. Then they compare this estimate with the stock price.

If the stock price is below its intrinsic value, they buy the stock. If it is above that, they sell.

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