Elliott's Singer agrees with Buffett, Dimon on profit guidance

  • Elliott's Singer agrees with Buffett, Dimon on profit guidance

Elliott's Singer agrees with Buffett, Dimon on profit guidance

Berkshire Hathaway CEO Warren Buffett, J.P. Morgan CEO Jamie Dimon and Amazon CEO Jeff Bezos have chosen a CEO for their health-care venture.

The billionaire investor Warren Buffett and JPMorgan Chase's CEO, Jamie Dimon, have voiced concerns that the financial markets' focus on short-term goals is hurting the economy and urged companies to move away from providing quarterly earnings guidance.

"In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", they wrote.

They argue that short-term guidance has encouraged companies to hold off on technology spending and hiring and research, and has even discouraged many private companies from going public at all.

Buffett, who is chairman of Berkshire Hathaway Inc (BRKa.N), and Dimon wrote in a Wall Street Journal column on Thursday that the pressure to meet short-term estimates has contributed to a fall in the number of US public companies. "We are encouraging all public companies to consider moving away from providing quarterly earnings-per-share guidance".

Although we've seen no immediate opposition to the proposed elimination of quarterly EPS guidance, it's not hard to imagine what at least one argument might be: just because companies don't publish the number does not mean they won't calculate such a number.

Dimon and Buffett noted that the pressure to meet short-term profit forecasts has contributed to a fall in the number of public companies in the U.S.in the past two decades, "depriving the economy of innovation and opportunity".

However, those favouring the practice vouch that it improves communications with Wall Street, reduces share price volatility and boosts a stock's value, the report said.

Both men said they still want companies to release detailed quarterly and annual financial data, so investors can evaluate them.

"When companies get where they're sort of living by so-called making the numbers, they do a lot of things that really are counter to the long-term interests of the business", Buffett told CNBC Thursday.