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Vitaliy Katsenelson’s Contrarian Edge: The market right now doesn’t care how fantastic your stocks are

The Roman philosopher Seneca wasn’t talking about the stock market when he wrote that “Time discovers truth,” but he could have been. In the long run a stock price will reflect a company’s (true) intrinsic value. In the short run the pricing is basically random. Here are two real-life examples.

Let’s say you had the smarts to buy Microsoft MSFT, -3.39% in November 1992. It would have been a brilliant decision in the long run — the software giant’s stock has gone up manyfold since. But nine months later, in August 1993, that call did not look so brilliant: Microsoft shares had declined 25% in less than a year.

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