Image source: Getty Images
I've gotta be honest; sometimes the Inspiration Fairy brings lots of great ideas for me to use in my writing.
At other times, well, let's just say she might have been too busy with Black Friday this week.
Not that I don't have anything to say – if you've read any of my work here, or on Twitter, you'll know I'm not short of an opinion.
But rather, sometimes it's hard to have something new, interesting and relevant to offer.
I started three different articles this week. I got a bee in my bonnet about different economic policies and announcements but, while I do think our readers enjoy and value that sometimes, I'm wary of overdoing it.
At times like these, I almost envy the day-traders – they always have a bright, shiny thing to chase. We long-term investors rarely get energised by those things… by design.
Frankly, my response to most business news and company announcements is… a shrug.
Not because I'm disinterested, but rather because they very rarely end up changing my view of a given company.
Most of them fall into the category of 'company doing what it does, and having a little more, or less, success than expected, but the thesis remains unchanged'.
Kinda sounds boring… and almost neglectful, right?
After all, the market reaction to these things can be anything from a yawn to severe. Doesn't that warrant a response?
Mostly… no.
There's two reasons.
Firstly, if the market is overreacting to a short term jump, or slump, then so be it. We're focused on the long term.
Second, if the news is thesis-moving, it's generally 'priced in' immediately, and there's no fancy trading that'd even be possible.
Disappointed? Expected me to have some fancy crystal ball or high-tech trading strategy?
Sorry, but again… no.
It'd be nice to imagine it's possible, but it's just not.
But also, if it was, do you reckon we'd beat the big end of town with their nanosecond trading algorithms and high speed data connections?
Here's the best thing, though: our style of investing doesn't need it.
We don't care about squiggly lines on a chart, day-trading strategies, or six-monitor Bloomberg terminals.
We don't want to look fancy, or impressive, or like modern-day Wolves of Wall Street.
We just want to make money.
And the best way we know to do that is to put the work into understanding companies, paying decent prices, and letting time do the work.
Kinda the way Warren Buffett does it.
No, I'm not Buffett. I will never be Buffett.
But an investment approach following his example is, we expect, a wonderful way to build long term wealth.
Which takes me back to the breathless reporting of results and the (I think) silly short-term trading that surrounds it.
When a company reports results (or more recently, updates the market on year-to-date sales, at annual general meetings), the question we ask is a simple one:
"Does this impact our view of the company's long term future, and the price we're prepared to pay for that future?"
Two such companies provided AGM updates this week: Harvey Norman Holdings Ltd (ASX: HVN) (I own shares) and Temple & Webster Group Ltd (ASX: TPW).
Both updates were very good: Harvey's sales were up 9% and Temple & Webster's revenue climbed 18%.
And the result?
Both companies' shares fell – Harvey by a little, Temple by a lot.
Why? The market seemed to want even more.
Now, a fall isn't necessarily or always wrong: if a company's shares are priced for 50% growth and it only delivers 5%, it might make sense for them to drop.
…maybe…
Because it's not about the past.
See, share prices should reflect not the last few months, but a company's future, from here to eternity.
Again, maybe a huge sales miss does dim the brightness of a business' long term future. If so, and if it was priced for perfection, it would make sense for shares to fall.
But take Temple & Webster.
Shares fell 32% on Wednesday.
That is, the market is telling you that it thinks the company's entire, eternal, future is a full one-third less bright than it believed, just a day earlier.
Really?
I mean, the market might be right (in which case it was very, very wrong a day earlier).
Here's a Black Friday special for you, for free: my team and I at Motley Fool Share Advisor, one of the investment services I run, reckon Temple & Webster is a Buy.
We thought so on Tuesday, before the fall. We still think so, today, after it.
Not because of, or despite, the announcement.
But because we think that Temple & Webster can compound sales and profit growth meaningfully over the next 5 and 10 years.
We might be wrong, of course. And hey, if we get to choose between 18% growth and 38% growth, we'd always choose the latter!
We think 18% sales growth is pretty good, though, and gives the company plenty of room to keep growing in future, as it executes against its strategy and benefits from a structural shift to ecommerce.
Most importantly, we know what game we're playing.
We're running a 42.2km marathon, not 422 100m sprints.
If you want to do the latter, good luck.
But if so, Aesop's hare called, and wants to give you some advice!
Have a great weekend.
Fool on!
