Course 209: Why Does a Stock's Price Rise or Fall?
Looking at the Long Term
In this course
1 Introduction
2 Case Study in Rising Prices: Wal-Mart
3 Falling Prices: The Internet and the Oil Industry
4 Looking at the Long Term

Legendary value investor Ben Graham used to say that in the short term, the stock market is a voting machine, but in the long term, it's a weighing machine. That means that any stock can be bid up in the short term if enough people want to own it, but in the long term the company has to deliver results--in the form of earnings and growth--in order to justify that price. Any stock can likewise get beaten down if the market becomes pessimistic about the company or its industry, but it will only stay down if that pessimism turns out to be justified in the long term. Every stock's behavior results from a combination of fundamentals and valuation, and recognizing how these two factors interact can help anybody navigate the ups and downs of the stock market.

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