Value stocks are stocks that are trading below their intrinsic value. Intrinsic value is the theoretical worth of a company based on its fundamentals, such as earnings, book value, and cash flow. Value investors believe that the market is often inefficient and that value stocks can be identified and purchased at a discount, providing investors with the potential for superior returns over the long term.

There are a number of factors that can contribute to a stock becoming undervalued. For example, a company may be experiencing temporary financial difficulties, or it may be operating in an out-of-favor industry. Value investors look for these types of opportunities, believing that the market will eventually recognize the true worth of the company and the stock price will rise.

Some of the key characteristics of value stocks include:

Low price-to-earnings ratio (P/E ratio): The P/E ratio is a common valuation metric that compares a company's stock price to its earnings per share. Value stocks typically have low P/E ratios, indicating that they are trading at a discount to their peers.

Low price-to-book ratio (P/B ratio): The P/B ratio compares a company's stock price to its book value per share. Book value is the net value of a company's assets after liabilities are subtracted. Value stocks typically have low P/B ratios, indicating that they are trading below their net asset value.
High dividend yield: Dividend yield is the percentage of a company's stock price that is paid out in dividends each year. Value stocks typically have high dividend yields, which can provide investors with a steady stream of income.

It is important to note that value investing is not a risk-free strategy. Value stocks can become undervalued for a variety of reasons, and there is no guarantee that the market will ever recognize their true worth. However, value investors believe that the potential rewards outweigh the risks, and they are willing to wait for the market to catch up.