What is a value stock?
A value stock is a type of investment that typically trades at a price that seems low given the underlying company's earnings and profitability. Many value stocks come from larger, more mature companies on solid financial footing. That's one reason why value stocks may be more likely to pay dividends, or a portion of earnings that companies pay shareholders: Well-established companies could be less focused on reinvesting excess cash to fuel growth than high-growth-minded companies.
Characteristics of value stocks
While value stocks can span many different industries and companies, they tend to have these common characteristics:
- Lower P/E ratios (price-to-earnings ratios), which represent how much the market is willing to pay for the company's earnings
- Dividend payments, though these aren't guaranteed
- Slower but stable growth and market share
- Solid fundamentals and balance sheets
- History of consistent profits, cash flow, and balance sheet strength
- Often found in defensive sectors that may be more resilient during economic downturns
Examples of value stocks
The following industries tend to offer value stocks. A company's value stock status can change based on its current valuation, but as of November 30, 2025, the following companies in the following industries appear in the top 10 holdings in Fidelity® Stock Selector Large Cap Value Fund (
- Insurance: Travelers, Chubb
- Energy: Exxon, Shell
- Financials: Bank of America, J.P. Morgan Chase, Wells Fargo
- Pharmaceuticals: Johnson & Johnson
The following make up the top 10 holdings of Fidelity® Stock Selector Large Cap Value Fund (
Fidelity® Stock Selector Large Cap Value Fund (FSLVX), Top 10 holdings (21.80%) as of October 31, 20251
- Alphabet (
), Class A, 4.01% - Amazon (
), 2.74% - Exxon Mobil (
), 2.48% - Bank of America (
), 2.48% - Wells Fargo (
), 1.89% - Johnson & Johnson (
), 1.76% - Boeing (
), 1.70% - J.P. Morgan Chase (
), 1.64% - Cummins Inc. (
), 1.57% - Salesforce (
), 1.53%
Fidelity® Value Discovery Fund (
- Alphabet (
), Class A, 4.13% - Exxon Mobil (
), 3.85% - Bank of America (
), 2.87% - Amazon (
), 2.54% - Cisco (
), 2.11% - Shell (
), 2.03% - Travelers (
), 1.99% - Wells Fargo (
), 1.95% - Chubb (
), 1.90% - Cigna Group (
), 1.64%
Note: These are examples only, not endorsements. Classifications are fluid, and stocks can exhibit both value and growth characteristics.
Value vs. growth stocks
Value stocks are different from growth stocks in a few ways. Growth stocks tend to be priced higher than value stocks in anticipation of potential future growth. Growth stock companies may be smaller and newer—and because they may be more likely to reinvest earnings to grow their business, they typically don't pay dividends. While growth stocks can experience more volatility, value stocks carry their own unique risks such as value traps—stocks that appear cheap but remain so indefinitely due to underlying business problems. Both investment styles involve risks.
Pros of value stocks
Here are some potential advantages of investing in value stocks:
- Stocks may be undervalued or available at "bargain" prices
- They're generally less volatile than growth stocks
- There's the potential to earn dividends
- As with all stocks, it's possible to realize future gains
- They can help diversify your investment portfolio
Cons of value stocks
Investing in value stocks also has some potential disadvantages:
- Even relatively low stock prices can fall further, potentially resulting in losses if you sell the stock
- Price increases may lag growth stocks' gains
- Dividend payments are not guaranteed and could shrink
- It may take a long time for a value stock to reach its full potential
- As many companies operate in mature industries, innovation may not be at the forefront and may not be attractive in tech-driven economies
Should you invest in value stocks?
All your investments should align with your financial goals, time horizon, and risk tolerance. When considering value stocks, it is important to align their characteristics with your financial goals. Because it may take a significant amount of time for a value stock to reach its perceived potential, an investor's time horizon is a critical factor. In terms of risk, while value stocks may offer a different risk profile than growth stocks, they are not inherently safe and carry risk of loss. Before investing in value stocks, look into why a company might be undervalued. Try to determine whether long-term issues could be lowering the stock price. If that’s the case, these wouldn’t be considered a true value. Short-term issues, on the other hand, may indicate the stock price could rise in the future. Some potential signs a low valuation might only be temporary: a one-time negative earnings report or short-term, problematic trends within a specific industry.
How to invest in value stocks
To buy value stocks, you'll need an investment account. Brokerage accounts, individual retirement accounts (IRAs), and health savings accounts (HSAs) generally allow you to hold a variety of investments, including value stocks. If your plan allows, you might be able to buy a value stock fund through a workplace retirement plan, like a 401(k).
Once you have your account, you could invest in individual stocks or many value stocks at once by buying shares in a diversified exchange-traded fund (ETF) or mutual fund. ETFs operate like stocks in that you can buy and sell them throughout the trading day; mutual funds trade only once per day at the end of the trading day.
Here are the steps to take to invest in value stocks or funds at Fidelity:
- Log in to your account.
- Type in the symbol for the stock or fund you want to purchase in the search bar. Or go to the Fidelity Stock Screener, Fidelity's ETF/ETP Screener, or Fidelity's Mutual Fund Research, and filter for value stocks and funds to get suggestions.
- When you've found an investment you want, select the account through which you want to buy and the dollar amount you wish to purchase.
- Preview your order, and if everything is correct, place your order.