Buffett dwells on book value

Over long periods, a stock will move in tandem with company's performance. In the short term, there may be no correlation between the two.

Stock price movements are so fickle. You cannot and should not measure a CEO's performance based on how much the stock has gained from year to year.

Earnings are pliable and a CEO can manipulate them in dozens of ways to inflate a company's bottom line fro several years. Using restructuring charges, asset sales, write-offs, employee layoffs, or "asset impairment" charges, corporations can generously, and legally, cook their books and give the impression they are functioning on all cyclinders, when, in fact, they could be throwing their profits down the drain.

For all the reasons above, Buffett dwells on book value. Understanding changes in book value is key to assessing whether a company is truly worth owning, in Buffett's view.