Value investing is a disciplined investment approach using valuation measures that help to avoid the emotional traps of the market. Stocks and markets are driven by emotions that often push prices from their intrinsic value. The value strategies seek to profit from other investors' misjudgments by seeking stocks that are out-of-favor or neglected by the market and by avoiding the high-flying fashionable stocks that have been swept up by market euphoria. Eventually the market rediscovers out-of-favor stocks and lets the high-fliers fall back to earth. This is why value investing is sometimes called contrarian investing.

Value investing selects stocks that are priced low relative to measures of worth, such as earnings, sales, assets and equity. Common measures of value include low price-earnings ratios, low price-to-book ratios, and high dividend yields. This is not to say that all firms with lower price-earnings ratios or high dividend yields are good values. To be a good value, they must be able to show some potential. Many stocks with low price-earnings ratios have little potential and deserve their low multiples.

As a general rule, approaches that focus primarily on value tend to have less volatility than the pure growth approaches, and they tend to have less portfolio turnover. Typically, they do not identify smaller firms, but focus on companies that are more mature and mid-sized or larger in terms of market capitalization. Historical earnings growth rates are rarely much above the market average, and the prices of the selected stocks do not tend to have momentum relative to the market. Value approaches tend to outperform other approaches during bear markets, but they can fall behind during bull markets, particularly during the strongest periods.

• We consider the Piotroski: High F-Score approach a "classic" value screen.

Value investing is a disciplined investment approach using valuation measures that help to avoid the emotional traps of the market. Stocks and markets are driven by emotions that often push prices from their intrinsic value. The value strategies seek to profit from other investors' misjudgments by seeking stocks that are out-of-favor or neglected by the market and by avoiding the high-flying fashionable stocks that have been swept up by market euphoria. Eventually the market rediscovers out-of-favor stocks and lets the high-fliers fall back to earth. This is why value investing is sometimes called contrarian investing.

Value investing selects stocks that are priced low relative to measures of worth, such as earnings, sales, assets and equity. Common measures of value include low price-earnings ratios, low price-to-book ratios, and high dividend yields. This is not to say that all firms with lower price-earnings ratios or high dividend yields are good values. To be a good value, they must be able to show some potential. Many stocks with low price-earnings ratios have little potential and deserve their low multiples.

As a general rule, approaches that focus primarily on value tend to have less volatility than the pure growth approaches, and they tend to have less portfolio turnover. Typically, they do not identify smaller firms, but focus on companies that are more mature and mid-sized or larger in terms of market capitalization. Historical earnings growth rates are rarely much above the market average, and the prices of the selected stocks do not tend to have momentum relative to the market. Value approaches tend to outperform other approaches during bear markets, but they can fall behind during bull markets, particularly during the strongest periods.

One of the biggest risks of value investing is that the market never agrees with your assessment that a stock is undervalued. As a result, you may buy a "value" stock only to have it remain a value stock or, worse yet, become even more of a value stock. One way to potentially overcome buying value stocks whose prices never appreciate is to apply price momentum criteria to a value-oriented stock selection approach. The approaches in the value with price momentum category identify value-oriented stocks and then require some level of absolute price strength or performance relative to a market index such as the S&P 500.

• The O'Shaughnessy: Tiny Titans screen is representative of a value with price momentum screen.

The growth investment style is concerned with selecting stocks that will exhibit above-average and increasing growth. Growth investors look for industries and companies that are in the aggressive growth and growth stages of their life cycle-a period associated with rapid and increasing growth rates in sales and earnings with still-reasonable profit margins.

Minimally, growth companies are growing above the rate of the overall economy. Practically speaking, however, the benchmark for being classified as a growth stock is a 20% annual growth rate in earnings per share. Unless you are looking at a cyclical company coming out of a slump, growth rates this high generally require capital spending to maintain expansion. Growth stocks will therefore retain most of their earnings. Investors looking for high-dividend-yielding stocks will generally look for firms late in the growth stage or in the mature stage.

One weakness with growth stocks, especially those in the aggressive growth stages, is that internal cash flow may not be able to support growth and, thus, creating more capital by issuing additional shares will be required. This may have the effect of diluting the existing ownership of shareholders.

Stocks with high growth and good prospects attract a great deal of attention. Price tends to be bid up with high anticipation. High expectations relative to current levels of earnings lead to high price-earnings ratios (price divided by earnings per share). It is not uncommon to see highly touted growth stocks with price-earnings multiples two to four times the market. As long as a firm maintains its earnings per share momentum and exceeds the growth expectations of the market, its stock price can be expected to increase tremendously. Growth stocks, however, tend to be volatile. A small deviation from market expectations during a quarterly earnings announcement can send the price flying in either direction. Institutional investors own a large percentage of growth stocks and when they all try to head for the exit door at the same time the price can tumble.

Growth strategies seek growth, period. Their focus is on companies that are rapidly expanding their sales and earnings. Often, these stocks are already on the move, with prices typically moving up faster than the market. The approach tends to be more volatile-prices can move up or down substantially with small changes in expectations-and it tends to perform better on a relative basis late in the bull market or when the economy is slightly down. For these reasons, it requires close monitoring.

• The Return on Equity approach provides a good example of a growth strategy.

The growth investment style is concerned with selecting stocks that will exhibit above-average and increasing growth. Growth investors look for industries and companies that are in the aggressive growth and growth stages of their life cycle-a period associated with rapid and increasing growth rates in sales and earnings with still-reasonable profit margins.

Minimally, growth companies are growing above the rate of the overall economy. Practically speaking, however, the benchmark for being classified as a growth stock is a 20% annual growth rate in earnings per share. Unless you are looking at a cyclical company coming out of a slump, growth rates this high generally require capital spending to maintain expansion. Growth stocks will therefore retain most of their earnings. Investors looking for high-dividend-yielding stocks will generally look for firms late in the growth stage or in the mature stage. One weakness with growth stocks, especially those in the aggressive growth stages, is that internal cash flow may not be able to support growth and, thus, creating more capital by issuing additional shares will be required. This may have the effect of diluting the existing ownership of shareholders.

Stocks with high growth and good prospects attract a great deal of attention. Price tends to be bid up with high anticipation. High expectations relative to current levels of earnings lead to high price-earnings ratios (price divided by earnings per share). It is not uncommon to see highly touted growth stocks with price-earnings multiples two to four times the market. As long as a firm maintains its earnings per share momentum and exceeds the growth expectations of the market, its stock price can be expected to increase tremendously. Growth stocks, however, tend to be volatile. A small deviation from market expectations during a quarterly earnings announcement can send the price flying in either direction. Institutional investors own a large percentage of growth stocks and when they all try to head for the exit door at the same time the price can tumble.

Growth strategies seek growth, period. Their focus is on companies that are rapidly expanding their sales and earnings. Often, these stocks are already on the move, with prices typically moving up faster than the market. The approach tends to be more volatile-prices can move up or down substantially with small changes in expectations-and it tends to perform better on a relative basis late in the bull market or when the economy is slightly down. For these reasons, it requires close monitoring.

In order to safeguard against buying a growth stock with waning momentum, the approaches in the growth with price momentum category also require minimum levels of absolute or relative price performance.

• William O'Neil's CAN SLIM stock selection methodology is a good example of a growth with price momentum strategy.

Value screens attempt to identify undervalued stocks. Growth screens look for companies with high and expanding growth rates. Combine elements of both styles of investing and you have a wide range of strategies that are buying growth at a reasonable price. The growth & value portfolios are a blend of two approaches and they vary considerably due to differing amounts of emphasis on growth and value.

Growth & value screens typically look for reasonable, but not necessarily the lowest, price-earnings ratio or price-to-book ratio. Screening just for stocks with a low price-earnings ratio may leave you with a list of companies with little or no growth prospects, while screening for high growth alone may turn up a list of stocks with unsustainable growth ready to disappoint investors.

• In the world of growth & value, you may want to consider the Zweig approach to illustrate the strategy.

Value screens attempt to identify undervalued stocks. Growth screens look for companies with high and expanding growth rates. Combine elements of both styles of investing and you have a wide range of strategies that are buying growth at a reasonable price. The growth & value portfolios are a blend of two approaches and they vary considerably due to differing amounts of emphasis on growth and value.

Growth & value screens typically look for reasonable, but not necessarily the lowest, price-earnings ratio or price-to-book ratio. Screening just for stocks with a low price-earnings ratio may leave you with a list of companies with little or no growth prospects, while screening for high growth alone may turn up a list of stocks with unsustainable growth ready to disappoint investors.

In order to safeguard against buying a growth stock with waning momentum, or a value stock whose stock price may potentially remain flat or even decline, the approaches in the growth & value with price momentum category also require minimum levels of absolute or relative price performance.

• In the world of growth & value with price momentum, you may want to consider the Stock Market Winners approach to illustrate the strategy.

Stock Screens that we list in the earnings estimates area focus on analyst revisions to consensus earnings estimates. These screens look at the impact of estimate revisions, which has shown that you may be better off avoiding recent downgrades even after the initial stock decline as well that upward earnings revisions may generate positive stock returns well after the revision takes place.

• The Dreman with Estimate Revisions approach is a good example of an approach focusing on changes to earnings estimates.

Stock Screens that we list in the specialty area are hard to categorize. The specialty screen currently tracked on the site looks at the impact of insider purchases and whether stock investment decisions based on the trading behavior of corporate insiders is a beneficial strategy.

• The Net Insider Purchases approach is currently the only specialty screen we track.