What is the focus of value stocks in terms of investment strategy?

Value stocks are centered around the strategy of finding undervalued companies. Investors who focus on value stocks seek out shares that are trading for less than their intrinsic or book value, often believing that the market has overreacted and undervalued the stock. This typically occurs when a company is facing temporary challenges or negative sentiment that doesn't reflect its true financial health and future potential.

The core idea is based on the belief that, over time, the market will recognize the company's true worth, leading to a correction where the stock price rises. This investment strategy is grounded in fundamental analysis, where aspects such as earnings, dividends, and financial ratios are evaluated to identify stocks that have strong fundamentals but are priced low compared to their potential. This forms a key component of the broader investment philosophy that emphasizes purchasing stocks at a discount to their perceived value.