What characterizes a "value fund"?

A value fund is characterized by its strategy of investing in stocks that are perceived to be undervalued relative to their intrinsic worth. This means that the fund seeks out companies whose stock prices are lower than their true value based on fundamental analysis. The goal is to purchase these underpriced stocks with the expectation that they will eventually appreciate in value as the market recognizes their true potential.

This strategy often involves a long-term investment horizon, as it may take time for the market to adjust the stock prices to reflect the underlying value of the companies. Value investors look for financial indicators that suggest a stock is undervalued, such as low price-to-earnings (P/E) ratios or price-to-book values.

In contrast, other strategies focus on different criteria, such as investing in high-risk stocks that offer the potential for high returns, which does not align with the conservative, long-term approach of value investing. Similarly, focusing on short-term price movements or investing in commodities and foreign currencies diverges from the core principle of seeking out undervalued stocks with strong growth potential. Thus, the definition of a value fund is distinctly captured by its emphasis on undervalued stocks, making the answer accurate.