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With rising interest rates, the war in Ukraine, and several other factors influencing the markets right now, it can be a difficult time for companies to issue guidance. In this Motley Fool Live segment from “Ask Us Anything,” recorded on April 11, Fool.com contributor Jamie Louko talks about how long-term investors should think about guidance, especially when companies are not issuing it.
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Jamie Louko: I want to specifically focus on the back half. What are you looking for, for guidance? If no guidance, what does that mean? Because like Lou said, there’s so much going on. I have no clue if the market has priced in any of these these 50 basis-point hikes or anything like that. Even if they did or didn’t, that’s not going to affect my decision-making. Looking at guidance for my companies, the companies that I own in my portfolio, really I’m just looking for continued growth. That’s honestly what I look for every single quarter, I’m looking for continued strong guidance and over primarily the long term. If they give second-quarter and full-year, I always look at the full-year and place heavier weight on the full-year. If they give three-year guidance, I’d place more weight on the three-year guidance than I would the second-quarter, because there’s a lot of things that can alter and change and make growth in the short term volatile.
Going to the if no guidance, what does that mean? I would be not surprised if I saw a lot of companies that I own not give guidance or take back some of their guidance. Because like I said, there’s a lot going on not only with interest rates, the Fed, the yield curve, the war, there’s so much stuff going on that it’s totally justified to be really hard to predict what’s going to be taking place over the next year to the point where companies like, “You know what? It’s so unpredictable right now, we’re going to hold off on guidance for a quarter or for six months and then we will give it will give it later in the year,” or something like that.
Personally I’m a fan of of not giving guidance, just because I focus on the long term and when companies give one quarter guidance, that personally that doesn’t tell me much Just because I’m not focused on what’s happening next quarter and focusing on three years, four or five years from now. It wouldn’t be the worst thing in the world if they didn’t give guidance but basically that would tell me that the market, the world, the financial environment as a whole right now is so uncertain and there’s so many moving parts that it’s difficult to forecast that out. I wouldn’t ding any company because they didn’t give guidance for the next quarter.
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