What strategy involves actively seeking out undervalued securities?

The strategy that involves actively seeking out undervalued securities is known as active portfolio management. This approach requires managers to conduct thorough research and analysis to identify securities that are undervalued relative to their intrinsic worth. The goal is to buy these undervalued assets with the expectation that their prices will rise over time, thus providing a higher return on investment. Active management contrasts with passive strategies, which do not involve attempting to outperform the market but rather aim to match market performance by tracking indices.

In active portfolio management, fund managers typically utilize various techniques, including fundamental analysis, technical analysis, or macroeconomic factors, to decide when to buy or sell securities. This proactive engagement in the investment process is what distinguishes it from strategies that are more static or systematic, such as passive portfolio management or strategic asset allocation, which focus on maintaining a balanced and diversified portfolio without frequent trading.