We often hear CEOs complain about the short-termism of Wall Street, but a commentary by value investor Francois Ticart in this week’s Barron’s questions whether most companies really focus on long-term value. Let’s include investor relations in that question. Ticart, founder & chairman of Tocqueville Asset Management, says:
Listed companies, the analysts who follow them, and the executives who run them have become increasingly short-term minded in recent years. Stocks now routinely respond to whether they “beat” or “miss” quarterly consensus estimates of sales and earnings, and much of the stock trading takes place on that basis. Needless to say, quarterly earnings have very little to do with long-term strategies or other fundamental factors. By focusing on them, financial analysis has become nearly useless to long-term, fundamental investors.
So think about IR: We say we want long-term investors, but how much energy do we focus on quarterly results and short-term fluctuations, and how much effort do we devote to communicating strategic drivers of our business over a 3-year to 5-year time horizon like the one Ticart favors? Are our own IR efforts part of the problem?