In a recent article, I introduced readers to the concept of Long News advocated by Kirk Citron. We can apply the concept to investing by taking a long term view when we evaluate the impact of news item.
My caveat is that we also have to apply common sense. After all, there are two certainties in life, namely, death and taxes.
Below are some headlines taken from the Business Section of the Sydney Morning Herald this week, and the implications for a five year investing timeframe.
New twist in battle
Gina Rinehart’s children have been granted access to their trust. There is a chance the outcome may have a spillover effect in relation to the iron ore industry in WA. However, this factor pales in significance to the issues we have canvassed in earlier articles concerning Fortescue Limited (ASX: FMG).
Shares slide on Europe worries
This is certainly newsworthy, but we shouldn’t let daily news sway our investing decisions. That said, any falls can be good times to look for bargains that the market offers in times of pessimism.
Billabong dumps boss
To holders of Billabong Limited (ASX: BBG), this is important long term news, given the announcement of a new CEO. Credentials, track record and shareholder-orientation are all important considerations. If she can replicate the success Sally MacDonald had with Oroton Ltd (ASX: ORL), shareholders will be richly rewarded for their patience.
Gillard vows to cut company tax, sometime
Government policy can have a long term impact on your investments. Be aware that the impact usually arises from totally unintended consequences. A reduction in the the corporate tax rate should boost corporate cash flow and profits, all things being equal. The effect compounded over 5 to 10 years can be significant.
New life ahead for zombie Gunns
A very informative and interesting article. Mr Manning has done most of the legwork for anyone interested in Gunns Limited (ASX: GNS).
Management reshuffle at David Jones
We have covered retail in several articles. This latest news from David Jones Limited (ASX: DJS) means more disruption and raises more questions concerning management’s ability. In retailing, management is all important. Holders of David Jones have to decide whether the current management is capable of guiding the company through major structural changes affecting the industry.
The application of a long term view to news items will have a two-fold beneficial effect on investors. The first effect is the prevention of knee-jerk reactions and short-termism. The second effect is clarity of thought and greater insight on the investing environment, fostering better decision-making.
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