Most of the time stocks with strong fundamentals will not be undervalued. However, bad news may affect these companies and the stock price starts to fall and becomes a good opportunity for the value investor. BUT, how to you know when is a good time to buy when prices are falling? When is a price that is low enough?

Fundamental Analysis determines Value, but not Price Low

You may have studied the fundamentals of a company and determined the value to be $2. The stock price has since fallen from $2.50 to $1.50. Based on valuation, it is definitely cheap to buy. You may have an entry rule such that you would buy the stock at 25% discount as the margin of safety. At $1.50, the stock is indeed at 25% discount to its value of $2. Unfortunately, However, the stock price continue to go down after you ......