Kris and I have discussed the problems with Wall Street research many times in the past. Wall Street is messed up in many ways, and the one thing that is severely screwed up is analysts’ infatuation with the next quarter. Warren Buffett doesn’t give quarterly guidance and never will. Neither does our friend Michael Dell. The great business operators are focused on returns on invested capital and free cash flow generation over the long haul – not reported quarterly earnings.
The focus on quarterly earnings is a game that Wall Street and companies choose to play, but it’s not productive. Kris and I are far more interested in finding the next ten or twenty baggers (10x to 20x total returns). That’s where the real money is to be made.
To the extent that Wall Street trashes a stock after an earnings miss and we see an opportunity to pick up some easy money, we will in all likelihood consider a trade. That said, our focus in the Creative Destruction Fund is on hunting down big game in the technology ecosystem.
