[ NOISE ] have little relevance to long-term performance , pointing out too much weight is attached to quarterly earnings reports as well . For example , he notes shares in growth stocks such as Tesla and Netflix will often “ go through the roof ” if earnings surprise on the upside and will collapse if they disappoint . “[ Sell-side ] analysts seem to be the arbiters of what is expected rather than the companies ,” he continues . “ But on the whole , I think they ’ re a waste of time . What matters is things like the high streets going online and the switch to electric vehicles : big , long-term themes .”
Wheat from the chaff Every investor now has the sum of human knowledge available at their fingertips . But James Spence , managing partner at Cerno Capital , says the proliferation of easily accessible information lends the illusion of knowledge . As a result , he says it is vital to take into account the motivation of people pushing this information on you . “ It ’ s fine if they are selling to you because you know that ,” he explains . “ Where you need to be more careful is with people who are not selling and you need to have a good sense of their emotional make-up .” This is a view echoed by Budden , who believes short-term incentives in the investment industry have led to a focus on short-term performance and the noise that drives it . “ You ’ ve got people investing for their pensions on a 20-year-plus horizon , but these are managed and looked after by a trustee who is appointed for a maximum of five years and they will appoint fund managers who are evaluated on an annual basis ,” he explains . “ Those fund managers are investing in companies whose management is focused on boosting quarterly earnings , so you ’ ve got the most terrible misalignment from the get-go . “ That ’ s what quarterly earnings cause , really short-term thinking . It is one of the reasons why you ’ re seeing a lot of companies staying private longer .”
Closing the door In terms of the best way to approach “ the noise ”, Spence points to the example of Buffett , who sits in his office in Omaha with the door closed . When asked why he does this , he replied : “ Why would I want to listen to other people ’ s conversations ?” “ You have to be somewhat crabby to protect your time and regulate the noise ,” Spence adds . “ By taking the same drive to work at the same time every day and ordering only two variants of breakfast , he keeps his mind free for the things he cares about .” trustnet . com