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What is a Value Manager?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 14 November 2016
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    2003-2016
    Conjecture Corporation
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A value manager is an investor or investment professional who focuses on purchasing stocks that are currently for sale below their current fair value. This type of investment activity requires that the manager have a solid working knowledge of how to identify discount stocks that are likely to increase in value over time, and can be sold at a later date for a substantial return. Working with value stock is somewhat different from working with growth stock, where the goal is to purchase shares of stock that is likely to increase in value over time and is held for the long-term.

When looking for the right type of stock for this type of strategy, the value manager will look closely at what is known as the price to book value ratio. This ratio is simply the comparison between the asking price for each share and the estimated worth of the share. By looking closely at stock that is currently selling for a unit price which is below the book value, the investor immediately realizes some amount of gains. If the stock is also demonstrating some potential for increasing in value over time, then the opportunity for realizing additional return by holding the shares for a time and then selling at a later date increases significantly.

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A competent value manager can identify value stock with relative ease, assess the history and current performance of the stock, and decide if the current price and the projected movement of the stock in the future is a good fit for the investor. If so, the manager will usually confer with the investor and hopefully obtain authorization to purchase a number of shares for the investor. As part of the process, the manager will sometimes make recommendations of how long to hold on to the shares until selling them, helping the investor earn the highest amount of return.

An investor who also functions as a value manager can make a great deal of money by purchasing the right value stock offerings at the right time, holding them until the price increases substantially, then selling them at a profit. Depending on the nature of the market where the stock is traded, the turnaround can be no more than a day or two, or take a month or more. Volatile markets where these discount stocks are traded may allow an investor to take into consideration any highly likely events that will drive up the price of the shares to buy low and sell high in a matter of a few days. With a combination of solid research skills, reliable instincts, and the ability to accurately read trends in the marketplace, a value manager can quickly generate a sizable return while taking on a very small amount of risk.

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