Talking of short termism: “analysts are stupid” and can’t see beyond quarterly results, or so said a leading captain of industry yesterday.
Sir Nigel Rudd, boss at Alliance Boots, reckons that the rationale for the merger of Boots and Alliance Unichem was obvious: “Healthcare is a growing business, people are getting older, they need more medicine.” And yet the city just doesn’t seem to be able to see it.
It’s this short sightedness from the city that eventually prompted deputy chairman Stafano Pessina to give up on the city, and throw his lot in with Kohlberg Kravis Roberts (KKR).
Sir Nigel told the FT: “When I did the Alliance Boots deal, everyone hated it. The greatest pleasure out of all of this has been the analysts#133;I actually love that. They are so stupid most of them… they are very bright or stupid.”
KKR might be the private equity company that was first named as the ‘Barbarians at the Gate’, but don’t forget that Rome had become tired and chaotic, and had stopped innovating before the Barbarians moved in and conquered.
But, in a way, if Sir Nigel is right that’s a good thing for private investors.
The private investor is often in a position to see trends, before analysts. The smart investor could have predicted the years of problems that befell Marks and Spencer just by shopping there. The recovery was also obvious to those who visited the store with a critical eye in the months before results started to improve.
Sometimes analysts are too pre-occupied with numbers and can ignore the bigger picture, one that Mr and Mrs commonsense can identify with ease.
© Investment & Business News 2013