One of the most fascinating things about market action like we are seeing today is how valuations suddenly become irrelevant. Is Amazon (AMZN) now worth 4% less than it was Monday? Is Alphabet GOOGL suddenly worth 5% less after posting a solid quarter last night?
Technically, the answer is "yes." Stocks are worth what the market is willing to pay for them. All those valuation metrics are meaningless if there is no one willing to buy at a certain price. There doesn't have to be a good reason for the market to change its mind about the value of a stock.
Legendary investor, and mentor to Warren Buffett, Benjamin Graham, once said that in the short run the market is a voting machine but in the long run it is a weighing machine. In the short run, the price of a stock is little more than a popularity contest. There isn't necessarily any substance there but over the long run, earnings, revenues and balance sheet will matter.
The things that matter on a day-to-day basis change constantly but that is what creates opportunities. Voters are fickle and change their mind while the scales that weigh value will be more stable over time. If we can take advantage of the bargains created by pessimistic "voters," the scales of value will eventually reward us.
Unless this is the start of a major bear market -- which may be possible -- there are some good opportunities being created right now. The weighing machine will matter again but right now it's a popularity contest and there aren't many stocks that are popular.