Suggested Link: Enough Whining For “Guidance”
Nearly all the investment pundits are blaming the recent decline in Google’s share price on the company’s refusal to provide guidance. But, one very familiar name isn’t. Today, former Wall Street internet analyst Henry Blodget writes: “I respect Google for not giving guidance, a practice that often reduces analysts to Excel-savvy parrots.”
Google (GOOG) has been mentioned surprisingly often on this blog, considering its lofty price. But, I don’t believe I’ve ever mentioned Henry Blodget before – and until today, I thought I never would. However, I find myself in complete agreement with the author of Internet Outsider.
I would love to write about other things besides Google, because it’s not a topic that’s likely to help you make a good investment. Later today, I will post an analysis of Pacific Sunwear (PSUN), a much better bet for investors, and a stock that’s more in keeping with my own value investing proclivities. However, I just couldn’t let the Google gaffe pass without writing anything about it.
Many of you already know the facts. If you don’t know them, I’m really not the one to tell you; I don’t pay much attention to Google and I don’t pay any attention to communications with analysts. So, for those that don’t know the facts, just Google “Google gaffe”.
I’m suggesting this link to Mr. Blodget’s post, because I reached the tipping point this morning, when I heard one analyst say a public company has a duty to instill confidence among investors. I’m paraphrasing here, I doubt he used the word “instill”. But, one hopes that confidence is the sort of thing that can only be earned gradually; so, instill would be the right word.
Obviously, I believe no such duty exists. Managers are not (or at least ought not to be) responsible for marketing shares. They have no duty to ensure a current owner rips off a future owner by dumping his shares at the highest price.A good management has the same two primary duties as a good agent.
Management has a duty to act on behalf of owners in exercising delegated powers (primarily those required for day-to-day business operations) and a duty to report back on its activities. Management does not have any duty to facilitate sales of stock on advantageous terms. Now, you could argue that the issue of confidence is larger than I’m making it out to be – that it goes beyond simply keeping the stock price up. However, I haven’t yet heard anyone argue that there is a lack of confidence among anyone but investors. In fact, this issue has nothing to do with Google’s business, which is management’s responsibility. The selling of shares is the investor’s responsibility.
I submitted this link to Fat Pitch News. So, if you like Mr. Blodget’s post, please bid it up over at Fat Pitch News so others will get a chance to read it as well (if enough people vote for the link, it will appear as one of the five headlines displayed on various sites).
Read “Enough Whining For Guidance”