All investors buy stocks expecting that future prices will be higher. To them the current price is “undervalued”. Nobody buy stocks thinking that it is currently overvalued.

Value investors is a special group whose idea of value is the value of the underlying business. They buy if the price is significantly lower than the business value as determined by the business fundamentals.

This what differentiate value investors from other types of investing such as those that think the current price is cheap relative to historical prices. There are also those that think current prices are cheap relative to what they think the market will think in the future.

Value investors idea of cheapness is relative the the business value.

The challenge then is how to estimate the business value. Some focus on the Assets of the company as the store of value. Some focus on the earnings power ignoring growth. Others focus on the growth prospects. The common thread is that they all believe that there is a business value and that it is possible to estimate it.

Of course all valuation is based on certain assumptions about the future. As such they look for some margin of safety when determining the value as a risk mitigation process.

The other thing that all value investor believe is that the market does not always reflect the business value. So if the market is very fearful, prices may drop below the business value and vice versa.

So if you are a value investor, you buy when the stock price provides a sufficient margin of safety. Nobody knows where the bottom is going to be. So the entry is more about the margin of safety than some bottom price.

So what is the benefits of value investing? It is a conservative approach. It is based on what a stock is - a real business. There is an economic logic to why prices can go higher than your purchased price

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