Investors say it’s a bad idea for companies to stop giving quarterly guidance. I think investors are just flat-out wrong. Quarterly guidance certainly distorts management decision-making, so we know it’s bad for the companies. It’s good for investors because it relieves them of the burden of having to research the companies they invest in, and really understand the businesses and their industries.

To that, I say “pfshaw!” Warren Buffett became the second richest man in the world investing. Read anything he’s written, and he stresses again and again that one can learn a lot about a company from talking to suppliers, customers, and competitors. You can learn about management’s past investing and management track record by reading old annual reports (not quarterly reports, but annual reports). With the internet, all that should be even easier than when Buffett did it.

Investors cry that “oh! oh! without quarterly guidance, fraud will creep in.” Give me a break, people. Enron filed quarterly reports. If no one’s taking the time to understand the companies and the industries, then they’re not going to notice the irregularities in the quarterly reports. And if they do take the time to do a good job, then they won’t need quarterly reports.

In short, let’s eliminate guidance and let businesses make some decisions without worrying about quarterly earnings. Let the investors do some work and be true investors, not simple, short-term gamblers on quarterly reports.

Investors warn against eliminating guidance……

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