In Security Analysis, Benjamin Graham writes, "stocks sell on earnings and dividends and not cash asset value unless distribution of these cash assets is in prospect."
What exactly does this mean?
He means that usually, investors (Mr. Market) will look at the income statement first and then the balance sheet. Stock prices move because of supply and demand. Supply rarely changes unless the company is buying back shares or diluting its shares. Demand is what causes stock prices to move the most. Supply and Demand is the first element that moves stock prices.
What will determine the demand for a stock depends on where we are in the market cycle. Market cycle is the second element.
The third element is what investors are focusing on.
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