The vice president of investments at Mantei & Associates and a registered representative for Centaurus Financial, Atul Makharia has been working in the financial services sector for more than two decades. Holding Series 7 and Series 63 certifications, Atul Makharia is familiar with such things as value investing.
One of the most basic investment strategies, value investing operates on the idea that the stock market functions inefficiently, overvaluing and undervaluing assets. With this guiding concept, value investors seek out bonds, stocks, and other investments that are undervalued in the market and trading for much lower than their intrinsic value. The assumption is that these stocks will rise to their true value in the future, thus generating good returns for stock holders.
According to value investors, there are several things that could lower a stock’s value, such as a report of poor profits or the overreaction of other investors following negative news. These events do not necessarily correlate with long-term company performance, but they can have dramatic effects on stock prices.
To determine a stock’s intrinsic value, investors will often use a valuation method that examines taxes, deprivation, cash flow, and other aspects of a business. The value determined via this method is compared to the current stock price. If investors notice a significant difference between the price and value of a stock, they will often purchase the stock and hold it until the value increases.
Atul Makharia 