The market is a moody partner who quotes a new price every day. You don’t have to accept it.
Price is not value.
Four companies, only their share price. Tap the cheap one.
A low share price is not cheap. Cheap is a lot of profit for what you pay.
← Red LinesRed Line 25 of 48 The idea The story Where you see it Where it bends This game’s numbersHow strong the proof isBGood proof, with limits Where it comes from
A price is what someone offers today. Value is what the thing is worth to its owner: here, a café making €10,000 a year. The two can sit far apart.
Your partner, Mr. Market, names a price for the café every day: €200,000 when he is thrilled, €60,000 when he is gloomy. The café is the same café all week. You can buy from him, sell to him, or ignore him.
Share prices jump on news that changes little about the business. A price on a gloomy day is an offer, not a verdict.
Sometimes the mood is right and the business really did change. Check the business, not only the price.
Worked out on this page
Prices swing far more than the companies’ later payouts can explain, a finding repeated for decades, though using it to profit is hard.
- Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends? Robert J. Shiller, American Economic Review 71(3), 421-436, 1981
- The Intelligent Investor Benjamin Graham, Harper & Brothers, 1949
Checked 2 Nov 2026 · How we grade
- A Strong proof: Many good studies or long official data, from different teams or countries, point the same way.
- B Good proof, with limits: Solid studies agree on the direction, but the size varies, or the data covers few places or few kinds of people.
- C Mixed proof: Some good studies for, some against, or the evidence covers only part of the line.
- D Thin proof: Mostly one book’s argument, one survey or stories. It may be wise, but it has not been tested well.
- = True by the sums: It follows from arithmetic, so no study can overturn it. We still show what real data says.
Benjamin Graham, The Intelligent Investor (1949). In our words, not quoted.
See it in numbers: P/E · Revenue (From Zero)
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