Legendary investor Benjamin Graham once stated that: "In the short run the market is a voting machine, but in the long run it is a weighing machine."
Essentially what he was saying is that in the short term the market acts like a voting machine, tallying up which shares are popular and which are unpopular. But in the long-term the market acts as a weighing machine, assessing the performance of a particular company.
Ultimately what matters most is the company's underlying business performance in the long-run, and not investors' opinions about its prospects in the short term.
Two shares which I feel fit this criteria are listed below. Recent events have driven their share prices lower, but in the long term I expect they will provide investors with strong returns.
Star Entertainment Group Ltd (ASX: SGR)
In the last month the casino operator's share price has fallen over 18%, meaning its shares are now changing hands at just 16x estimated FY 2017's earnings. The decline in its share price came following the arrest of several Crown Resorts Ltd (ASX: CWN) employees in China last month. These arrests were made in relation to alleged violations of gambling laws. Star Entertainment has been quick to reiterate that it works within the parameters determined by the Chinese authorities, as it does in every other market in which it operates.
Around 16% of its EBITDA is estimated to derive from its international VIPs. Whilst this drama may have a negative impact on the segment, I don't believe it will be enough to warrant the sell-off. Whilst things could remain volatile until Crown's situation is resolved, I still believe this is a great opportunity to make a long-term investment. The strong tailwinds of the tourism boom that Australia is experiencing should assist the company in growing earnings at a good rate for years to come.
Vocus Communications Limited (ASX: VOC)
This growing home broadband, data centre, and dark fibre provider is another company which has been sold off to an alarming degree. In the last three months Vocus shareholders have seen the value of their holdings plummet by 33%, thanks partly to disappointing guidance from rival TPG Telecom Ltd (ASX: TPM).
Whilst NBN margins are predicted to be less generous than current home broadband margins, I believe Vocus has the potential for strong earnings growth through winning market share during the NBN transition. With its shares priced at just 18x full year earnings, I believe they could be classed as dirt cheap right now.