Value investors, who specialise in buying undervalued stocks, have watched in dismay over recent years as their portfolios have underperformed major market indexes carried to dizzying heights by rampant blue chip performance.

But value fund managers said on Thursday the recent equity market falls would allow them to compete again on a level playing field with other investors.

``This is the period when we are happiest,'' said head of global equity research Sandy Nairn at value investor Templeton Investment Management in Edinburgh.

``It is very uncomfortable when markets keep going up but you have to keep your nerve until fair value returns,'' Nairn said. ``And now is the time when you can pick things up cheaply.''

Value investors believe stockmarkets are imperfect, prone to over-reacting to both good and bad news.

The time to buy, theysay, is when a share price falls below the long-term trend line of its ``fair value,'' based on analysis of company specific factors such as its profits, cash flow and market position.

The guru of all value investors is fund manager Warren Buffett of the US-based Berkshire Hathaway fund.

His investment philosophy can be boiled down to the principle that given careful stock selection and then holding tight, a well-run business will withstand the vagaries of stock markets.

Buffett said in February he had acquired 129.7 million ounces of silver, equivalent to about 15 per cent of the world's annual silver mine capacity, on the assumption that the commodity's price had drifted too low.

``Value investors have underperformed markets many times...but we earn our money by sticking with what we have always done on the basis that at the end of the day the world is rational -- it is just irrational for short periods,'' Nairn said.

Fund managers said a key ``value'' indicator in the British equity market wasthe ratio between the more expensive half of the FTSE All Share index and the cheaper half. Before the recent falls the ratio had risen to 4.5 times versus the long-term average of 2.5 times.

They said larger capitalisation stocks had benefitted were generally the most overvalued, benefitting most from a flood of new money into western stock markets from retail investors.

``We haven't had a bull market across the board in recent years,'' said head of UK equities Peter Seabrook at Societe Generale Asset Management in London.``Valuations of larger index stocks have been stretched further and further but the breadth of the market has been poor,'' he said.

Value-based fund managers said their analytical approach to valuations would help them to pick through the rubble of the recent sell-offs and find opportunities.``But after a correction, if you've got well developed processes for stock selection they really come into their own,'' he said. ``The trick is to find companies where the (earnings) prospectsare no lower but the fall in the market price is disproportionate.''

Hatherley said it was important in this type of situation to focus on a small number of stocks.

``You can't dance with all the pretty girls on the dance floor,'' he said. ``But there are opportunities cropping up already where valuations are incorrect in relation to companies prospects.''