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A very bad idea IMO


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https://money.cnn.com/2018/08/17/news/companies/trump-drop-quarterly-reports/index.html

 

There is only a handful of CEO's that I trust including Dimon and Buffett. However, even these guys won't be at the helm forever.

 

Many companies, especially the small ones, barely communicate anything of value in between quarterly reports. Going now for 6 months? Nuts IMO and just another opportunity for more insider trading on undisclosed information.

 

While I do not hold companies accountable to hit certain numbers at each quarter, looking at their results, outlook, risk that emerge, etc. is certainly an opportunity for me to adjust my thesis.

 

And I do feel that managers need to be at least held accountable to show progress and do what they said they would do. Every 6 months is way too much leash for people that earn in the vast majority of cases outrageous salaries. They should at least face that level of scrutiny from investors.

 

Now, if they were able to find a way to ban algos and funds who automatically dump on 1 penny EPS miss I would be all for it but, reducing reporting. Not for me!

 

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This will just cause people to read way too much into the info when they do get it. Would imagine much more significant price moves. I would most likely never invest in a turn around story or smallerish company with large customer concentration again either. Bad idea.

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I like quarterly reporting and find it very valuable. I find it takes listening to 3 or 4 earnings calls to get a good handle on management. What do they say? Do they walk the talk? Etc. Moving to reporting 2X per year would make this more difficult.

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Yep it's a horrible idea.

 

The reason for it is bullshit too.... it forces companies to focus on short term performance. No it doesn't they focus on short term performance because they want to focus on short term performance. Because it help with the stock price and consequently their stock options.

 

There are companies that don't focus on the short term. They still report quarterly and they're doing just fine.

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Yep it's a horrible idea.

 

The reason for it is bullshit too.... it forces companies to focus on short term performance. No it doesn't they focus on short term performance because they want to focus on short term performance. Because it help with the stock price and consequently their stock options.

 

There are companies that don't focus on the short term. They still report quarterly and they're doing just fine.

 

The focus on quarterly earnings is in fact due to management being fixated and incentivized on it. It differs a lot from company to company too. Incentives explain almost everything.

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You want a law I'd support?

 

Management cannot do ANY phone calls with ANY investors outside of a public forum.  No 1:1s and no sell side calls.  You want to talk to investors?  Host a public call.

 

Result:  A more fair market + management has 100s of hours a year they don't have to spend marketing.  And sell side/banks need to work harder for their research money.

 

But...it will never happen.  Too much money in the access.

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I think its fine.  Bollore only reports twice a year so maybe this is standard elsewhere?  I think it pulls mgmt away from the short term focus wall street puts on them.  Yes it will make things more volatile stock by stock but so what.  If there is volatility there is opportunity. 

 

Its also a small advantage for smaller companies as i see it. Probably no real impact to costs for larger firms.  However if u can get more small stocks to list thats a win.

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I think it's not that significant. In many countries companies report twice a year, and it works just fine. At the same time I also don't think there is really a good case to be made to reduce the frequency of reporting numbers. I can't believe communicating with shareholders 4 times a year is such a big burden that 2 times is better....

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There's nothing wrong with the frequency of reporting.

C-Suites, as agents, just don't like the accountability to the company's owners (you & I)

 

Owners, investors, and management are simply DIFFERENT stakeholders, with DIFFERENT agendas. .

The best that can happen is relative alignment; investors and managers in the short-term, owners in the long-term

You want long-term thinking?, change the structural incentive for investors.

 

The obvious place is taxation.

Tax the sh1t out of the short-termers, and make the long-termers tax free.

 

SD

 

 

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I've always thought 3x/year is superior to 4x or 2x. I've also never really thought about why I always thought this. Quarterly seems too much, bi annually seems like too little.

 

Agree with the notion about not accepting any calls/everything public.

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Pepsi CEO explains what she told Trump about financial reporting

https://www.axios.com/trump-pepsi-ceo-indra-nooyi-sec-finanicals-c987a70c-c57f-4987-8f6a-5ef793ffdbf7.html

 

President Trump tweeted today that he wants securities regulators to study the idea of having public companies report earnings twice per year instead of quarterly as a way to promote job growth. Later, he noted that the idea came from outgoing Pepsi chairman and CEO Indra Nooyi.

 

Nooyi tells Axios, via an emailed statement:

 

"Many market participants, as well as the Business Roundtable which we are a part of, have been discussing how to better orient corporations to have a more long-term view. Most agree that a short-term only view can inhibit long-term strategy, and thus long-term investment and value creation. My comments were made in that broader context, and included a suggestion to explore the harmonization of the European system and the U.S. system of financial reporting. In the end, all companies have to balance short-term and long-term performance."

 

Nooyi mentioned the Business Roundtable. Here's a recent statement by the BR:

 

Business Roundtable Supports Move Away from Short-Term Guidance

https://www.businessroundtable.org/media/news-releases/business-roundtable-supports-move-away-short-term-guidance

 

Business Roundtable today announced its support for companies moving away from an expectation of providing quarterly earnings per share guidance and potentially dropping such guidance in the future.

 

...

 

Providing guidance about quarterly earnings performance can incentivize undue focus on short-term profits, at the expense of long-term strategic investments, ultimately to the detriment of companies and their shareholders.

 

Business Roundtable statement is about quarterly guidance, not quarterly reporting.

 

Either Nooyi expressed her personal opinion that deviates from the Business Roundtable consensus, or she wasn't clear in her communication with Trump, or... what are the odds... Trump misrepresented her ideas. There's lots of confusion all around.

 

 

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Lol at companies and CEOs like Nooyi blaming quarterly reporting for their inability to focus on LT.  They can always choose to not play the game of giving guidance and the meet and beat but then how they will justify their $$$$ bonuses and keep options in the money in shitty quarters.. Amazing how often shitty quarterly results are delivered with maintaining full-year guidance or 100 reasons why there are 1x charges to blame. 

 

If you actually want LT focus, demand executive comp be tied to LT shareholder / company results reported under GAAP with no ability for the board to accelerate LT awards on retirement etc..  But OMG thats communism. how can you dictate how much private companies pay. But yeah lets dictate how often companies report to their owners. 

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I wish they only report once a year. Sick of the quarterly beating/missing earnings guestimate game of Wall street. It is just wasting time and money and Analysts do bad job all the time and they blame the companies. :-)

 

Shouldnt We want more of these analysts doing bad jobs and impacting stock prices for non-fundamental reasons giving LT investors more chances to take advantage of Mr. Market? 

 

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Lol at companies and CEOs like Nooyi blaming quarterly reporting for their inability to focus on LT.  They can always choose to not play the game of giving guidance and the meet and beat but then how they will justify their $$$$ bonuses and keep options in the money in shitty quarters.. Amazing how often shitty quarterly results are delivered with maintaining full-year guidance or 100 reasons why there are 1x charges to blame. 

 

If you actually want LT focus, demand executive comp be tied to LT shareholder / company results reported under GAAP with no ability for the board to accelerate LT awards on retirement etc..  But OMG thats communism. how can you dictate how much private companies pay. But yeah lets dictate how often companies report to their owners.

 

100% agree.

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