Recently, while organizing my investment notes, I found myself thinking again about the topic of value investing. To be honest, if you want to survive in the stock market long term, this methodology is absolutely worth studying carefully.

Put simply, value investing is one thing: find stocks that the market is undervaluing, and then wait patiently. It sounds easy, but in practice, it requires you to analyze indicators such as dividend yield, price-to-book ratio, and price-to-earnings ratio—so you can identify stocks whose prices are truly undervalued—then hold them long term, and sell when the stock becomes overvalued. This isn’t just plain “buy low and sell high.” It’s buying when market prices are far below intrinsic value, and selling when they are above intrinsic value.

I’ve always thought that Warren Buffett’s quote is especially well said: “Be fearful when others are greedy, and greedy when others are fearful.” This is the core tenet of value investing. When investor sentiment runs hot or turns into extreme panic, stock prices often end up overvalued or undervalued—but the stock’s true value doesn’t actually change. So you can’t rely only on how high or low prices have been in the past; you also need to factor in fundamentals, technicals, and multiple other considerations to find what the market is truly undervaluing.

When it comes to the pros and cons, I really do think value investing has its appeal. First, the profits can be quite substantial, because you’re buying high-quality companies that are undervalued. Over time, with the compounding effect, your assets grow along with the company. Second, the risk is relatively lower, because these are usually industry leaders with strong moats and competitiveness, leading to more steady returns. However, the drawbacks are clear as well: it’s difficult to assess a company’s value—you need to put a lot of effort into studying financial statements—and you also have to have enough patience to withstand stock price volatility; sometimes it can even get cut in half. In addition, diversification may be insufficient, which makes you vulnerable to concentration risk.

If you want to do value investing well, I suggest starting from these perspectives. First, choose companies that are already industry leaders. In the later stage of the capital market, big players are inevitable—investing should add safety rather than just chasing growth. Second, select from the constituents of large indices, such as the Dow Jones Industrial Average or the S&P 500, because these companies are typically the most representative. Third, do financial statement analysis—build your own valuation model—and check whether the target is truly undervalued.

There are several stock-picking principles of Warren Buffett that are particularly worth referencing. He likes large-cap stocks with at least $50 million in annual after-tax net profit, and he requires stable profitability—at least 5 consecutive years of high ROE (above 15%) with relatively low debt. The management team needs to be reliable, and the business model should be relatively simple—avoid overly complex technology companies. The final step is to calculate a reasonable investment price: use a discounted cash flow method to estimate intrinsic value, and then set aside a 25% to 35% margin of safety to reduce risk.

In the U.S. market, there are many value stocks suitable for long-term holding, such as Apple, Procter & Gamble, Cisco, VISA, and IBM. Their ROE over 5 years is quite strong, and they are all constituents of the Dow or the S&P 500.

If you want to learn value investing in depth, I recommend a few books. Howard Marks’s *The Most Important Thing* distills years of his investment experience, and Buffett has read it twice. Aswath Damodaran’s *Investment Valuation: Tools and Techniques for Determining the Value of Any Asset* explains corporate valuation most clearly—although it feels a bit like a textbook, the ideas are straightforward. Jeremy Miller’s *The Warren Buffett Way* compiles Buffett’s early letters to shareholders, letting you learn his investment thinking when he was younger. Zhang Minghui’s *The Big Accountant Teaches You to Understand Business from Financial Statements* is a good introductory book to financial statements, with many practical case studies. There’s also Benjamin Graham’s *The Intelligent Investor*, a classic work on value stocks and the approach Buffett used early in his career.

In the end, value investing is about finding stocks whose prices are below intrinsic value, and then investing patiently for the long term. It’s a very rational approach with relatively lower risk, but it isn’t some holy grail of investing—there are both advantages and disadvantages. What matters most is finding the tools and methods that fit you, because that’s the real key to winning in the stock market over the long run.