Value investing can be a unique way to approach the stock market. Instead of following short-term trends or trying to make quick gains, value investing focuses on finding certain companies that may be undervalued compared to their real business potential.
Value funds like ICICI Prudential Value Fund follow this approach by selecting companies based on their fundamentals, financial strength, and market pricing. Knowing how these fund investments can help you understand the principles of value investing, and whether they fit into a broader investment strategy.
Basics of Value Investing
Value investing is about looking at a company’s actual worth. This involves checking financial statements, business models, sector position and market conditions. The idea is not to guess short-term price movements but to see whether the current price reflects the company’s potential.
Funds such as the ICICI Prudential Value Fund follow this approach. They look for stocks that appear reasonably priced based on earnings, business strength, and future growth potential. Watching how these funds select stocks and manage portfolios over time can give you a perspective on value investing.
How Value Funds Select Investments
The investment process usually begins by screening companies based on certain criteria. Fund managers of value-based funds, including the ICICI Prudential Value Fund, typically follow the below pattern to select stock.
- Screening companies: Value fund managers start by looking at a wide set of companies and narrowing them down based on certain financial and business criteria.
- Assessing fundamentals: They typically focus on companies with relatively stable cash flows, strong balance sheets and a history of disciplined management.
- Comparing price to worth: The next step is to compare the current stock price with the company’s underlying financial strength. Stocks trading below what the fundamentals suggest may be considered for investment.
- Portfolio adjustments: Fund managers regularly review market trends, sector performance, and company developments. Changes in the portfolio are based on these observations rather than predictions about short-term price movements.
Diversification and Risk Perspective in Value Funds
Value funds do not invest in only one sector or a few companies. They usually spread investments across multiple companies that meet value criteria.
For example, the ICICI Prudential Value Fund invests in companies across banking, healthcare, consumer goods, industrial sectors and others. This mix helps balance potential risks. If one company or sector faces difficulties, the effect on the overall fund is generally limited.
Having said that, value funds still carry some risk. This is mainly because stock prices can move with market changes, sector shifts, or the economy. Instead of worrying about what will happen, it helps to see how the fund spreads its investments, selects companies carefully, and keeps track of its holdings.
How Regular Review Helps Understand Value Investing
Value funds become more useful when you check them periodically. By reviewing portfolio updates and scheme disclosures, you can see how the fund applies its stated approach.
Changes in allocation, stock selection, or sector exposure reflect the fund manager’s view of market conditions and company fundamentals, and this process allows you to engage thoughtfully. It also helps understand the discipline behind value investing.
Checking updates also helps you compare different value funds, see how holding periods affect the portfolio, and evaluate whether your current investment fits your broader financial strategy.
Bottom line
Value investing is not about predicting short-term gains or following market trends; rather, it is about observing company valuation.
Funds like ICICI Prudential Value Fund provide a way to follow this approach in a structured manner. By focusing on process, behaviour, and consistency rather than outcomes, you can use value funds to understand how careful, long-term investing works and how it fits into your financial plan.
