I'm a big believer in value investing and Warren Buffett's ideas of buying companies for less than what they're worth.
But here's the part that I could never wrap my head around... Let's say a company's "intrinsic value" is $200 per share, but the stock price is $100/share. Ok, so that's a good buy then, you're buying "a dollar for fifty cents", as Buffett puts it.
But, in order to make money, the PRICE needs to go up, because you need to sell it. You only own a tiny fraction of the company, so you don't actually receive the cash flows yourself. So if the market stays irrational and the price never catches up to the intrinsic value, you could still lose money.
Now if you had a controlling share of the company, or wholly owned the company, those cash flows would be yours and the intrinsic value is all you care about. Warren said he doesn't really care about the stock price, he just wants to own good businesses... That's great if you can buy the whole company outright, but let's say his KO shares went down fifty percent and stayed there for decades, not keeping up with its intrinsic value... wouldn't that impact him as much as any other investor??
I feel like something's missing here, what force is there in the market to keep the price and the intrinsic value close to each other? Is there some arbitrage I don't know about? Can't a stock just be mispriced forever? Or are value investors relying on faith that price eventually catches up to intrinsic value?