It's time for CEOs to stop being weathermen and end their obsession with the calendar. Yesterday the CEOs of Disney (DIS) and Adobe (ADBE) indulged in both and it wrecked their stocks totally unnecessarily.
Bob Chapek, Disney's CEO, talked several times about how his company is facing headwinds, including the Delta version of COVID. I do not think he understood the power of the word headwind to ruin the narrative.
It does not matter what is going right, if you say, at an analyst meeting that you have a headwind in an area of your myriad businesses, it's all that the analysts will focus on. That word means "lookout, we aren't going to make our numbers because of a major sea change that is crushing us."
No one thinks, hmmm, that could be, say, a "speedbump."
Nope, a headwind is a tsunami, a Category 5 hurricane that obliterates the good.
In some ways, I don't mind. My charitable trust - Action Alerts PLUS - has been waiting to get into Disney's stock on a price break and Chapek gave us one. Had he just used a term like "momentary" then the stock wouldn't have been crushed,
Oh, hold it, there was more. Chapek talked about how dividends and buybacks are in the "distant future." Ouch, no no no. Dividends are the province of the board and if the board thinks the company is in good enough shape to re-institute one then so be it.
Simple: "We love buybacks but the growth here is too terrific to pass up. We may be an older company but we are faced with opportunities that need investment in order to be ready for the second half of this decade."
Here's a company I have loved since the 60s when it changed its model to a better subscription centered business. Its products are amazing. It had an awesome quarter as Shantanu Narayen told us when he came on Mad Money. Almost every line item was beaten and the forecast was beaten and raised.
But the stock got crushed.
Why? Because Shantanu used the word "seasonality" in the sense that there was seasonal softness. The jackals who follow these growth companies believe that growth should always be unencumbered and that the summer should be just as fast as the winter, that there can't be any slowdown whatsoever.
Had Shantanu simply said, "We had the usual weakness, but actually it wasn't as bad as other times," which has the added advantage of being true, I think the stock might have fallen a tad but not much more.
Again, though, you got an opportunity you don't deserve. This is a stock that has been one of the greatest of all time but periodically it has hiccups. I need you to look at the chart. How has it done after every hiccup.
My prediction? This time will be no different. Now these swoons tend not to be one day affairs. That said, if you wait 48 hours the selling usually dries up and you get a chance to buy the shares of one of the greatest companies of all time.
I would take it.