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Finance GlossaryValue Investing
Value Investing
Definition of Value Investing
Value investing is an investment strategy focused on buying securities that appear undervalued relative to their fundamentals. Investors look for stocks trading below intrinsic value due to temporary issues, such as short-term earnings decline, expecting that prices will rise once the market corrects its mispricing.
Related Terms
Operating Leverage
Operating Leverage is a measure of how much a company's operating income changes as its sales revenue changes. It is defined by the ratio between fixed cost and variable cost within the cost structure of a company. A company with high operating leverage has a higher percentage of fixed costs relative to variable costs. Companies in capital-intensive sectors such as manufacturing, telecommunications, or infrastructure are likely to have high operating leverage. High operating leverage can result in a higher increase in profits as sales rise, but can also cause a higher decrease in profits as sales fall.
Cash Contract
A cash contract is an agreement between two parties in which the delivery of goods is involved at a predetermined price and date. Typically, bulk buyers like big companies enter into cash contracts on the spot price of a commodity.
These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.
These companies aren’t in the business of speculation. As a result, the delivery of goods is always involved in cash contracts, unlike futures where the contract can be settled with cash without taking delivery.
Illiquid Asset
An illiquid asset is something of value that can not be exchanged for cash easily. Although an illiquid asset may have value, you will not be able to find buyers for it readily. As a result, illiquid assets are typically sold at a significant discount or worse, lose value and expire.
Hammer Candlestick Pattern
A Hammer Candlestick pattern occurs when a stock, commodity, or currency opens much lower than its previous closing price but moves close to or above the the same price at the close. The pattern looks like a hammer, hence the name “Hammer Candlestick”.
The candlestick can be read as follows:
The candlestick can be read as follows:
- The main body shows the difference between the financial security’s opening and closing price.
- The wick (shadow) of the candlestick shows the high and low prices of the security for the day.
Brokerage
Brokerage is the fee that an investor or trader must pay to a brokerage in exchange for its services. Brokerage varies from platform to platform. But, broadly speaking, brokerage on intraday, futures, and options trading is known to be higher than equity delivery (investing).
Bullion
Bullion is used to refer to gold, silver, and other non-ferrous metals that have been designed to have high purity. These metals are generally molded into bars, coins, and other valuable items.
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