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By Carmel Fisher, Managing Director
06 March, 2017
Actress Pamela Anderson famously said "It's great to be a blonde. With low expectations it's very easy to surprise people". I can attest to the fact that brunettes rarely get away with low expectations; neither do redheads or chief executives of listed companies (most of whom are grey haired these days).
At this time of the year, managing expectations is what it's all about for listed companies, and it is always with a little trepidation that we await the profit reporting season. Have our companies done what they said they'd do? Have they communicated openly to the investment community in the past six months to manage expectations and guide profit forecasts to within cooee of actual results? And are their outlook statements positive enough to prompt analysts to raise expectations for the next round of profit results?
Unfortunately, the job of chief executives has become even harder in recent times because a) analysts remain fixated on the bottom line of company results even though earnings often tell only a partial story and b) reactions are often outsized compared to results, such as a 2% profit "miss" against forecasts resulting in a 10% plus share price fall.
It's fair to say that our expectations of our portfolio companies have not been dashed so far in the first two months of the year, but neither have we been blown away by companies over-delivering. We fared well through the recent profit result round and have enjoyed exploiting opportunities when the market either had the wrong expectations or reacted inappropriately to what were actually good results (as Terry discusses later).
Managing expectations is a year-round job for politicians and central bankers. Talk of what we might expect from President Trump and, to a lesser extent, the Federal Reserve has been a significant distraction and pastime for market participants this year. But a distraction is all it is.
The economic and political environment has so far not proven contrary to expectations; the world is rolling along mostly as anticipated, despite all the daily noise suggesting otherwise. Just as company earnings should not be viewed in a vacuum (but in the context of the underlying business fundamentals and long term strategy) economic and political news needs to be considered in the context of the broad economic outlook which, so far this year, remains positive and entirely consistent with expectations.
I was very pleased last week to announce the appointment of Bruce McLachlan as our new Chief Executive Officer, to take over the reins as I retire from my executive role. Bruce will be joining Fisher Funds from 18 April 2017 and I really am delighted as he has a wealth of experience in the financial sector, and importantly, a passion for client service.
When we began our search for a new chief executive, we knew we wanted someone who understood and was excited about maintaining and growing the wealth of New Zealanders. We looked for someone who would continue our longstanding performance record and our commitment to exceptional client service. Bruce was an obvious choice for the role.
Bruce has been CEO of The Co-Operative Bank for the past four years. Under his leadership, the bank has consistently achieved top rankings in customer satisfaction and client service. Previously, Bruce worked for 10 years at Westpac NZ, where his roles included leading both its business banking and retail banking businesses; he was also Westpac NZ's acting CEO during 2008/9.
I know that you will warmly welcome Bruce and we hope you will take the opportunity to meet him during our roadshow in May/June (more details to come).
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