What is the Value in Value Investing?

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Value investing is an investment discipline that was popularized by Benjamin Graham through his seminal books like Security Analysis published in 1934 and The Intelligent Investor in 1949. Value investing seeks to identify undervalued stocks that are trading below their intrinsic value, and buying and holding them until they turn around. Such value stocks typically trade at price-to-earnings (P/E) and price-to-book (P/B) multiples that are significantly below the valuations at which the market or their peers trade. While Warren Buffett has amassed a colossal fortune by adhering to the principles of value investing, there is little doubt that for us lesser mortals, value investing has its pitfalls in addition to its undeniable benefits. We discuss some of these pros and cons below.
Pros of Value Investing

Potential for Spectacular Profits: Value investing offers the potential for spectacular profits, because the value investor seeks to buy the stock when it is trading...
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