As the second quarterly reporting season of 2013 kicks off, it’s worth putting some context around what the numbers mean. Investment banks tout their analysts who’s estimates have been on the money and quickly brush over instances where they were wide of the mark. All the fuss created around the numbers draws investors in and this has led to a situation where too much weight is given to what has just happened in the last 3 months.
The chart below is a stylised illustration of the value of an equity (or equity index, if you like). The red sliver at the bottom is the value of one quarter. The red and light blue sections together make up the value from one year. And the darker blue section is the remaining value in the equity. So, assuming you are an equity investor, which would you rather devote time to analysing?