Value stocks are those stocks that tend to trade at a low price relative to their fundamentals (i.e. dividends, earnings, sales, etc.). Therefore, stocks that have a relatively high dividend yield; low price to sales ratio; and/or low PE ratio would tend to be classified as value stocks. The low valuations that value stocks enjoy are often as a result of some type of bad news (i.e. poor earnings report, bad press, legal issues, etc.). However value investors tend to focus on quality value stocks in hopes that all the bad news is out and already priced in with the stock having nowhere to go but up.
For example, the 10 companies that make up Dogs of the Dow would be considered value stocks since they trade at a relatively high dividend yield. Dogs of the Dow posts a daily list of the 10 value stocks that comprise the Dogs of the Dow.
Related Terms: Dogs of the Dow – Dividend Yield – Dividend – PE Ratio – Earnings Yield – Earnings – Growth Stocks