Value investing is an investment strategy that involves picking stocks trading for less than their book or intrinsic value. It requires actively searching for stocks that are undervalued in the market.

A value investor believes that the market overreacts to any bad or good news. Hence, the short-term movements from this volatility do not correspond to the long-term fundamentals of most companies.
Such an imbalance presents an opportunity to investors, allowing them to buy undervalued profitable stocks at a discounted price. Value investors use extensive financial analysis to discover undervalued companies, tend to go against the grain in their investment decisions, and invest for the long-term in companies they have estimated as valuable.

Here are some points that you should know about value investing.

• Finding undervalued stocks requires time and patience. There are a lot of metrics to consider, and the risk can be high if you invest in a stock that doesn’t perform.
• Moreover, value investments should be for the long-term to avail of the most discounted stock prices. These investments in stocks might take years to show returns.
• Value investing requires contrarian thinking. It rejects the efficient market hypothesis and involves going against market movements.

PROS

• Good profits- Value investing can generate a spectacular gain as investors buy stocks underpriced and sell above their intrinsic value. As the time goes by, an underestimated asset reveals its true worth and yields fruit because market players don’t feel bearish about them any longer.

• Low risks, high reward- A risk/reward ratio of a value stock is favorable, provided the stock is evaluated properly. An underestimated security is traded significantly below its valuations thus the loss-associated risk is minimized. At the same time, if a stock turns around in the investor’s favor, there’s potential for generous returns.

• Systemic Approach- Successful value investing is based on a profound fundamental analysis, rather than emotions. An investor has to evaluate multiple metrics like P/E, P/B, D/E, etc. that eventually help them arrive at the safety margin of a stock. Margin of safety principle dictates that a stock is worth buying if its market value is well below the intrinsic value.

• Power of compounding- Value investing makes the most of the magnifying power of compounding. Your investments increase dramatically if you reinvest dividends and returns obtained from value companies. Thus, in the course of time, you benefit well from interest on interest. This is exactly what Warren Buffett holds dear, and we have reasons to believe him.

CONS

• Value companies hide- Undervalued shares worth investing are difficult to identify. Estimating the intrinsic value requires a certain level of expertise and not every investor has it. Even if they do, there are a lot of things beyond investors’ control like changes in management and behavior of peers. You can analyze all the fundamentals but there’s no guarantee you’ll make the right decision.

• Patience- Value investing is not for everyone. Those who want to reap the benefits quickly may find it challenging. Sometimes proponents of this strategy have to hold their positions for years until the market sentiment changes in their favor. But in the end, patience may bring high reward.

• Pitfalls of waiting- Having ownership in a value company can be fruitful, but it can equally be a dead end. Value traders can hold stocks for a lifetime but never see them turn around. In such a no-win situation, investors are forced to quit with a loss.

• Rowing against the stream- Value investing requires self-confidence meaning that you’ll have to go against the flow. In a sense, value investors are very similar to contrarians. At least both of the styles are based on looking for price discrepancies and acting against the prevailing sentiment. Anyway, to see your investments bringing hardly any returns is quite a pressure.

So this way of investing doesn't suit everyone. It is up to the individual to decide their own investing style based on their nature.