Don't Take Investment Reports Too Seriously

It's now 3:19 a.m. here and I'm up reading an annual report for a chain of restaurants that is, to a large degree, regional. After putting together my basic thesis, I thought it would be interesting to pull up what the analysts at a major rating firm wrote about the business. It never ceases to amaze me how foolish some of the stuff put out by these houses can be! The idea of successful investing is to buy companies for the long-term, hold them (preferably in a tax-advantaged way), and grow wealthier through the prosperity of the underlying business through a combination of capital gains and reinvested dividends. Instead, comments along the lines of, "we don't anticipate any price movement for the next twelve months so investors should hold," make absolutely no sense.

Why? Because not even the Federal Reserve can tell you the price of General Motors in three months or Coca-Cola in six. It just isn't going to happen because there are too many factors in play at any given time. Does it ever occur to anyone that if these people actually knew the short-term direction of equities, they wouldn't be sitting in a cubicle writing a report for other investors? They'd have gotten their hands on some real money and put it to work, making a fortune in no time. As Warren Buffett said, Wall Street is the only place where people drive Rolls Royces to get financial advice from those who ride the subway.