What Is a Value Stock?

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A value stock is traditionally from a European company or a company with a very low price to earnings ratio. Learn how value stocks are good for very safe investments over the long-term with information from an investment manager in this free video on investing.

Part of the Video Series: Stocks & Mutual Fund Investments
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Video Transcript

O.k., what is a value stock. A value stock is traditionally a stock that is something that a lot of times it's in Euro company. If it's not in Euro company it's just a company that's been kept with a very low PE ration, price to earnings ratio. And the term value comes from the fact that for you know a certain price, say you know, twenty five dollars for the stock the earnings, dividend payments are quite high. Traditionally a stock that's a value stock doesn't have the growth potential of a growth stock. It's because the earnings and the dividends that are being paid out are usually coming to the person who's investing in the company. And there will be growth but it's over a period of time. Their focus isn't growth, their focus is to have a very high value of you know, high return equity. And an equity that isn't concerned with that will plow the money back in to the company itself and use that to grow and build more. So value stock is good for, it's a very safe investment philosophy, it's also something that you know, growth over a long period of time is more of the norm.

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