1.We know that in the long term price of the stocks will follow the value of the company.
2.The other thing we know is that if the value of the company doubles then your money doubles as well.(in case you didn't pay too much for the stock)
3.Last thing we know is that mr.Market is manio-depressive freak.


I discovered this chart on Morningstar.com - symbol- charts -fundamental - Annual Growth - Equity/share.(you don't have to log on to see the charts)


You will see equity/share chart together with price/share chart and oh-la-la here is mr.Market revealed. Its amazing !!!! I think that on this chart is Warren Buffetts secret revealed as well :

1.you see that price/share really follows equity/share in the long term JOSB
2.you see that equity/share of all his companies is growing in time (try KO,WMT, BRKA)
3.you can see how is Mr.Market overreacting 

This is superb lets take housebuilders:

TOL its Equity/Share will slightly increased this year,but the price is the same as was when the value was 60% lower
You can see the overreaction because if you cut large margin that luxury housebuilder has. TOL can still stay profitable. 

PHM- today its value is the same as was in 2005,but today the price of the stock is the same as was in 2002 when the value of the company was two times lower than is today. So here you can see how badly is market overreacting and why Bill Miller paid the price he paid.He didn't expect that market will be such a overreacting freak.

F- this is nice example why this was not bargain but trap -losing value again and again

Here you see why Buffett loves trains: BNI,UNP I'm pretty sure now you can see the value in few years thats why he was crying he didn't see it before.

This discovery has huge implication you can see why Buffett is not focused on cigar butts,and why he is so focused on free cash flow and what is most important why he is not losing money!!!!