>> The theory is simple: a company's stock price represents the stock market's best estimation of the company's value. >This is contrary to all of the very lit

>> The theory is simple: a company's stock price represents the stock market's best estimation of the company's value. >This is contrary to all of the very little bit that I understand of the stock market. Investors attempt to find companies which are undervalued, and invest in them; by definition, that would mean that the market is not accurately estimating the company's value. A company's "real value", however you care to measure that, might be some kind of attractor in the market graph, but that's about the best I'd give it. Not that I know anything about this stuff. It's a tautology that the value of something is defined by what people are willing to pay for it. When the markets are open, shares of a large company are changing hands hundreds to thousands of times per minute. It sounds like you are suggesting that a company has some kind of "real value" that's divorced from its current selling price -- if so, how would one determine what that is? The efficient market hypothesis (which most pros believe is accurate, at least in its weakest form) tells us that it's not possible to pick stocks that are "undervalued." The EMH dictates that all information relevant to the value of a company is incorporated in the price, so it's not possible for any one investor to rationally discern that a particular stock is undervalued.