Individual investors often point to the long-term success of Warren
Buffett as proof that value investing works. They are correct, and
Buffett is just one example of the many long-term investors who have
found success with value investing. While value investing works, many
investors fail to succeed with this strategy.
I believe the reason
value investing is so difficult to implement is because it is
challenging to define exactly what "value" means. Some investors use the
price-to-earnings (P/E) ratio and buy when the P/E ratio is low. Others
search for stocks with low price-to-sales (P/S) ratio in their hunt for
value. In addition to these two tools, there are dozens of other ways
to measure value. In the right hands, and with enough time, any
disciplined approach to value investing should work in the long term. (more)
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