What is a value stock? 📄
A value stock is a stock at a price lower than what the company’s performance might suggest. In other words, it is an undervalued stock with a large market value (market cap in the billions). If the stock has a low value (undervalued), make sure that the reasons for the decline are not related to the share itself but to external factors such as a general decline in the stock market.
Why resort to value stocks? 🧐
Value stocks are one of the most effective ways to make a profit in the EGX.
How can you build a portfolio full of value shares? 🧐
Dogs of the Dow is an investment strategy that uses the stocks with the highest dividend yield in the Dow Jones Index each year. They consist of major companies from all different sectors, including financial, technology, consumer goods, health, energy, industrials, and other materials but not transportation or utilities. The 30 stocks you include in the Dow 30 are overseen by a selection committee of By S&P Dow Jones.
If we apply this strategy in the Egyptian Stock Exchange, we will find a handful of value stocks: 👍
Many stocks in the EGX are traded at a price lower than their price, and here we will invest in them in the hopes that the stock will rise to its actual price and record profits.
How can it be revolved as we said above, we will see the stocks that generate profits and start seeing their value, by calculating the book value of the stock and comparing it with its current price and the nominal value of the stock.
Example:
*Nominal value: EGP 1 💰
*Market Value: EGP 11,595,105,280 💰
*Dividend distribution: A share always declares dividends 💯
*Current share value: EGP 2.56 💰
*Total Assets: EGP 66,039,250,000 💰
*Total Liabilities: EGP 42,118,960,000 💰
*The company’s current number of shares: 4,529,338,000 shares
And calculate the book value of the share = (total assets – total liabilities) / number of shares of the company
= (42,118,960,000 – 66,039,250,000) / 4,529,338,000 = EGP 5.3 💰
By comparing the book value of the company with the current value of the share and the nominal value, we find that the stock is trading below its value. Also, we find the market value of the company in billions, which is a very positive indicator, and the stock gives dividends. This classifies the stock as a value stock and a good investment.
