There are few companies in the world scrutinised by investment advisors so thoroughly as stock market darling, the Macquarie Group (ASX code MQG).
On May 3, the group announced a record net profit of $2.98 billion for the year, up 17 per cent on the year before. That was not unexpected - the group had earlier forecast an increase of at least 15 per cent.
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But when this financial giant noted that its profit in the current year is likely to be down slightly, it seemed to come as a big surprise to the investment professionals.
On the ASX, the shares immediately fell by more than 6 per cent. Analysts rushed to revise their estimates of the value of shares.
J P Morgan cut their price target by 2.3 per cent to $130 a share. Citi cut theirs by 1.2 per cent to $123.50, Morgan Stanley cut by 2.9 per cent to $136 a share and Bell Potter, the only bull in the paddock, raised their estimate by 1.4 per cent to $140 a share.
Such wide variations make a cynical investor wonder if they really know what is going on, or if they are just playing darts with a rotating dartboard. To be fair, Macquarie is a global giant, with fingers in just about every financial pie around the world. It would be hard for anyone to take account of all the factors that could make a difference to the bottom line.
The moral is never take financial advice as gospel. To a greater or lesser extent we are all guessing.
There is less guesswork involved with smaller, simpler companies. The jump in shares in TasFoods (TFL) this month, for instance, was obviously a response to the decision to buy the Betta Milk Co-op.
The $11.5m deal is significant for TasFoods. Betta Milk has net sales of about $16m a year: TasFoods' revenue last year was just under $40m. TasFoods is raising $8m in a fully underwritten share offer at 12c a share, to help fund the deal, and the Punter is happy to contribute.
- The Punter has no financial qualifications and no links to the financial services industry. He owns shares in a number of companies featured in this column.