Nowadays businesses here seem beset by short-termism, focusing their attention on immediate occurrences. That certainly does not include the high-speed traders who hold their speculative positions frequently for not more than a few seconds.
Companies’ regular briefings state that one should consider the long-term outlook for their companies. That would benefit investors rather than the traders who hold company shares for some unspecified interval.
Business has persuaded governments to favour long-term holders of shares. Thus in the United States to qualify for capital gains exemption a security must be held for at least six months. In France there are plans underway to give extra voting rights to long-term holders and the European Commission is considering a similar plan.
The Supreme Court of the State of Delaware ruled that the real owners of a corporation are those who have been shareholders for some period. Also, some shareholders have suggested that corporations no longer issue quarterly statements of earnings as that tends to focus only on the immediate outlook. To implement that idea many companies have turned themselves into private companies so that interim earnings no longer are required.
It is understandable to hold those views. In the 2007-8 recession, shares frequently were dumped because the immediate outlook was so bleak. The great success of German shareholders reinforced that view as the stock market over the past several years has performed remarkably well. As history shows, those who were able to ride out the business recessions of the post-war decades outperformed those who sold their investments and tried to replace them at a satisfactory price. Even those who underwent the trauma of the Great Depression of 1929 over the next 10 to 15 years performed the best by holding on to their stocks.
Still, there is the example of Japan where for more than a decade that stock market has been in a deep slump.
Two authors, Jim Collins and Jerry Porras, wrote a book Built to Last, and argued that companies that relied on research and training, and long-term objectives, far surpassed other companies who pursue a different path.
Furthermore, while long-term investors in Canadian Pacific or CN Rail have seen their investments multiplied many times, as is the case with our charted banks, many mining companies’ shares have at best been treading water or closed down entirely, like Kerr Addison.
Many companies repurchase their own shares when they look inexpensive, but so often the timing is poor and those decisions prove to be incorrect. In general, however, while it is not always the right choice, the longer term is by far the best course to pursue.