Mr Market

I think it is worth starting with the mighty Benjamin Graham's description who Mr Market exactly is, from his book 'The Intelligent Investor'

'Imagine that in some private business you own a small share that cost you $1,000. One of your partners, named Mr. Market, is very obliging indeed. Every day he tells you what he thinks your interest is worth and furthermore offers either to buy you out or to sell you an additional interest on that basis. Sometimes his idea of value appears plausible and justified by business developments and prospects as you know them. Often, on the other hand, Mr. Market lets his enthusiasm or his fears run away with him, and the value he proposes seems to you a little short of silly.
If you are a prudent investor or a sensible businessman, will you let Mr. Market’s daily communication determine your view of the value of a $1,000 interest in the enterprise? Only in case you agree with him, or in case you want to trade with him. You may be happy to sell out to him when he quotes you a ridiculously high price, and equally happy to buy from him when his price is low. But the rest of the time you will be wiser to form your own ideas of the value of your holdings, based on full reports from the company about its operations and financial position.'

Everyday there is a buy and sell price quoted for the stocks of thousands of companies around the world. This is what Mr Market is willing to pay or receive in exchange for these equities. He is the outcome of the many thousands and millions of transactions ongoing at that moment in the market. Do not assume he is stupid or always mispricing those stocks, such a contrarian strategy is a sure way to ruin. However, with some patience, knowledge and the right strategy (plus perhaps a bit of luck) you may be able to find stocks that have been priced below their true intrinsic value or where Mr Market has been too pessimistic.

Let's take a looks at the share price for example of clothing giant H&M from the past year. The difference between the high and low is nearly 20%. Has the underlying value of the business really changed that much?
Some would definitely say no, however don't be fooled into thinking it is easy to know where and when Mr Market has gone wrong. There would have been very rational reasons for valuing H&M at 210SEK back in June.

If you wish to look for such opportunities one way of finding them is to read the headlines to see where there are areas of panic, stress or exuberance. Some traders and investors believe it is better to switch off the talking heads as it can be a distraction and negatively effect their thinking.

I agree with them, this is why it is important to read the headlines with the mindset of trying understand what Mr Market is thinking and feeling rather than following what he is saying. For example there may be a negative quarterly earnings report on a good company, a bearish review of a stock, perhaps certain sectors are getting hammered to new lows.

What does Mr Market really hate at the moment and want to sell at a cheap price?

Here are some links to Mr Markets thoughts:

Avanza: Swedish equities
Affärsvärlden:Swedish equities
Dagens Industri:Swedish equities

Yahoo finance UK
Yahoo finance US

Bloomberg
Financial Times