We all agree that as value investor we should not be worried about the next quarter but rather have a longer term view of the business. But some recent trends brings on the question that how long should this long term be when evaluating business.
Few examples of what I am referring to.
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All export oriented companies are benefiting from favorable currency rate situation. It is impossible to predict currency movements in the future so it is difficult to predict how long this situation is going to last. So when evaluating these sectors what is your POV - do you temper your future expectations because you build in the scenario that situation may be unfavorable in future.
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Another common trend now is lowering of inputs costs across sectors. As a results you see higher profit growths than Revenue growth. This is very common in sectors like FMCG which are not growing revenues but are showing healthy earnings growth. This situation is likely to be cyclical and in future inputs costs will rise - but again no way to predict when. So do you discount some of the margin expansion happening. Personally when looking at growth I focus more on Revenue growth and use it to anchor future outlook.
so how do others look at future - business that may look attractive in 2-3 year horizon may face headwinds in future.
looking for thoughts form others