Warren Buffett has long argued that stock prices and business value often move on different timelines. In his 1993 Berkshire Hathaway (BRK.B) (BRK.A) shareholder letter, the CEO offered a historical example designed to separate short-term market judgment from long-term economic reality.
Pointing to Coca-Cola (KO), Buffett wrote that the company went public in 1919 at $40 per share, only to see its stock fall more than 50% within a year as the market reassessed its prospects, before ultimately compounding into extraordinary wealth over decades. As Buffett noted, “at yearend 1993, that single share, with dividends reinvested, was worth more than $2.1 million.” If you continued the trend until December 15, 2025, that sum would have grown to an eye-watering $29.4 million.
Buffett summarized the lesson by invoking the legendary investor Ben Graham’s idea that “in the short run, the market is a voting machine… but in the long run, the market is a weighing machine.” If you look at Coca-Cola stock through a historical lens, the correct action is obvious. Every pullback is a buying opportunity, and any concern that arises over the course of a year or two is overblown.
The context of Buffett’s remarks was not a market crash, but a reminder that early disappointment, volatility, or prolonged skepticism does not preclude exceptional long-term outcomes.
His authority on the subject stems from both history and practice. Buffett built Berkshire Hathaway by consistently focusing on durable businesses, reinvestment economics, and long holding periods, often maintaining positions through years when market sentiment ran against him. His Coca-Cola example shows that even iconic companies can experience sharp, discouraging drawdowns before their economic weight is fully recognized.
That principle remains highly relevant in modern markets. Periods of rapid innovation, shifting interest rates, and concentrated enthusiasm, such as recent surges in artificial intelligence and other thematic trades, have heightened concerns about speculative excess. At the same time, a number of established companies with strong cash generation, global brands, or entrenched platforms have seen their share prices stagnate or decline due to cyclical pressures, margin concerns, or changing investor preferences. Buffett’s framework does not suggest that every beaten-down stock is a bargain, but it does emphasize that price weakness alone is not evidence of business weakness.
Markets Often Overreact
The enduring takeaway is that markets often overreact to near-term uncertainty while underweighting long-term earning power. When pessimism dominates, prices can reflect fear, fatigue, or impatience rather than a sober assessment of a company’s competitive position. Over time, however, businesses that continue to generate cash, defend their moats, and reinvest effectively tend to have their value “weighed,” regardless of how they were previously “voted” on by the market.
These gems are where Buffett made his bread and butter for decades. And many of these gems still exist today. Otherwise, amazing companies have their stock prices beaten down by short-term concerns, creating buying opportunities for investors.
For example, investors are currently piling into artificial intelligence and other future-oriented technologies. However, this means traditional, “boring” businesses are getting left behind. They have growing revenue and earnings per share, but underperforming stock prices. Buffett says, in the long term, these will inevitably converge. A few examples of these include:
United Parcel Service
United Parcel Service (UPS) offers a clear illustration of how market prices can lag behind materially improved business fundamentals. Compared with its pre-pandemic position in 2019, UPS today operates a more efficient, higher-margin, and more disciplined business. Revenue per package has risen, operating margins have structurally improved, and the company has placed greater emphasis on premium services, pricing discipline, and network optimization. Management has also strengthened free cash flow generation and returned capital to shareholders more consistently through dividends and buybacks.
Despite these improvements, UPS shares trade at roughly the same levels seen before the COVID-19 pandemic. The reason lies largely in the stock’s path rather than the business’s progress. During the pandemic, extraordinary e-commerce demand pushed volumes and investor expectations to unsustainably high levels, driving the stock sharply upward. As those conditions normalized, the market repriced UPS downward, effectively anchoring on post-pandemic comparisons rather than long-term operational gains.
The result is a disconnect between business quality and market perception. While shipment volumes have moderated from pandemic peaks, UPS’s underlying economics remain stronger than in 2019, with a more profitable mix of packages and a leaner cost structure. In Buffett’s terms, the market’s “vote” has been influenced by the fading of exceptional conditions, even as the company’s long-term “weight” has increased. This dynamic highlights how normalization after an extraordinary period can obscure genuine progress, leaving fundamentally stronger businesses trading at prices that reflect past excess rather than present reality.
Procter & Gamble
Procter & Gamble (PG) has faced valuation pressure as investors rotate toward faster-growing sectors and respond to inflation-driven cost concerns. Despite this, the company continues to deliver consistent cash flow, pricing power across household brands, and a long record of dividend growth. The gap between muted share performance and steady fundamentals reflects the kind of divergence Buffett described.
While there are some reasons to worry and to see a breather in the stock price, the idea here is that a bad year for an otherwise great business should be looked at as a buying opportunity (for those with conviction for the stock).
PayPal
PayPal (PYPL) has experienced a prolonged share price decline amid slowing growth narratives and intensified competition in digital payments. However, the company remains profitable, generates significant free cash flow, and operates a globally scaled payments network embedded in online commerce. Market skepticism has focused on growth deceleration, while underlying earnings power continues to outpace the stock’s performance.
Together, these examples illustrate the timeless relevance of Buffett’s lesson: markets may vote harshly in uncertain periods, but over the long run, it is business fundamentals that tend to carry the most weight.
On the date of publication, Caleb Naysmith did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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