There are basically two ways of selecting equity investing. These are buying growth stock or buying value stock. Growth stocks are referred to as equities of companies with strong expected growth potential while Value stocks are referred to as equities that are currently undervalued. A balanced diversified portfolio should have both growth stock and value stock. Such balanced portfolios may be referred to as a blended portfolio.
How to Spot a Value Stock
Value stocks will have bargain-price as the company is spotted as unfavorable in the stock market. A value stock will have an equity price lesser than stock prices of companies in the same industry. Negative publicity that relates to unsatisfactory earnings reports or legal issues are indicators of a value stock as the market will negatively consider the company’s long-term prospects. There is possibility that a value stocks will come from a mature company with a stable dividend issuance that is briefly going through negative events. Nevertheless, any company that has recently issued equities has a higher value potential as many investors may be unaware of the entity.
Value stocks are considered riskier than the growth stocks. The reason being the skeptical attitude held by the market towards value stocks. For value stocks to be profitable, the market must change its view of the company.