Recent research has found that growth investors actually faired worse over time than value investors.  In essence, value investing ironically resulted in more growth than growth investing.  There is a simple reason for that.  Value investing goes from the fundamentals up to the market price.  Growth either goes in the opposition direction or actually never goes there at all.

There is a reason why ultra successful investors like Warren Buffett find value investing to be the best investment strategy in the world.  The great news is that you don’t have to be a genius to be one.

Value investing starts with a critical and fundamental analysis of the company itself.  At the starting point, you are completely blind to what the shares are trading for or how fast it has been or not been growing in the last 52 weeks.

You look at their financial statements and make sure they are solid and without any major anomalies.  You also look at their business model and make sure that it is solid against competitors.  You need to make sure they are well positioned to outpaced their competition for the next little while.  You also want to take a glance at the market they are going after.  See if it’s been saturated or it’s growing with room for more business.

Then you have to make a valuation call on the business.  That’s not easy to do, especially for a retail investor.  There are many easy models to follow that will give you a good sense of how much a company should be worth.  I say ‘should’ because sometimes it will not match the market’s valuation.

Then you go look at the market price of the company.  Here’s a quick stock market basics lesson on finding out the value: you look at the market cap.  I won’t go into how to calculate it right now, but you can use any stock screener to find these values.  If your valuation is higher than the market cap by 20% or more, than you may have a winner.  That is how you do value investing.