In our recent publication, we shared a curated list of 11 Ridiculously Cheap Stocks to Invest In. Among these, Weibo Corporation (NASDAQ:WB) emerges as a noteworthy candidate, deserving a deep dive into its performance relative to other undervalued stocks in today's market.

The quest for value in investing mirrors the thrill of hunting for bargains in the commodity market. Just as savvy consumers compare relative prices to uncover discounted products, investors engage in a similar practice when navigating the complex landscape of financial markets. The crux of both endeavors revolves around one fundamental principle: price matters.

In an arena teeming with overpriced stocks, the ability to identify a hidden gem can set apart a discerning investor from one who acts on impulse. Smart investing is not merely about choosing what to buy; it requires an understanding that value is intrinsically linked to the price one is willing to pay. Those who can recognize the potential of an overlooked stock often reap the rewards of their insight.

To grasp the concept of a cheap stock, we must first clarify what this term encompasses. There are primarily two interpretations. The first considers a stock cheap based solely on its low share price. The second, and more widely accepted definition, refers to an undervalued stockone that is trading below its intrinsic value when evaluated against earnings, revenue, or asset benchmarks. Our analysis aligns more closely with this second understanding, suggesting that a cheap stock is one that offers significant value relative to its actual potential.

One effective method for identifying cheap stocks is the forward price-to-earnings (P/E) ratio. This metric allows investors to quantify how much they are paying for each dollar of a companys earnings. A lower P/E ratio compared to industry peers, historical averages, or the broader market may indicate a stock is undervalued.

A compelling report by Hoover Capital Management (HCM) delves into the historical performance of value versus growth stocks, utilizing the French High Minus Low (HML) factor to analyze data spanning nearly a century, from July 1926 to December 2023. The findings are striking: value stocks have outperformed their growth counterparts by an astounding 3,000%. Essentially, this means that investing in value stocks has yielded returns 30 times greater than growth investing.

This notion is further supported by research conducted by economist Victoria Galsband, which reveals that from 1975 to 2010, cheap stocks consistently outperformed growth stocks across all G7 nations, including Canada, the United States, Japan, and various leading European economies.

Additionally, an insightful analysis regarding the effects of companies being added to or removed from the S&P 500 index reveals a noteworthy trend. When companies are removed from the index, they are often undervalued, yet many of these firms noticeably outperform the market. A study by Research Affiliates highlighted that companies removed from the S&P between 1990 and 2022 outperformed those added by over 5% annually. This reinforces our perspective that undervalued stocks, which we categorize as cheap stocks, possess a higher likelihood of generating superior returns.