This focus on the near-term appears especially prevalent in the outlook surrounding Western Digital Corp (WDC), a company we discussed last week as a potential value investment. The questions asked on a company's conference call can give an investor an idea of what the concerns are of the company's analysts. WDC's analysts appear only interested in the company's next six months. Consider these paraphrased questions asked of the company from the first seven callers:
1) Will the pricing that was set in June change during this quarter, or stay the same?
2) What will demand and pricing be through the fall? What are the key items that will impact the September and December gross margins? Can you take out any costs immediately to improve the gross margin in the September quarter?
3) Did European customers continue buying into start of the September quarter?
4) What's the inventory situation with respect to back-to-school demand?
5) Might some holiday inventory build get pulled into the fall?
6) What does industry capacity look like relative to demand for the next two quarters?
7) How much restocking did customers do in the March quarter?
Even on the rest of the call, almost every caller had at least one (and in some cases, all) of their questions based on the next quarter. I have never seen a group of analysts so concerned with the short-term. (Often, this can lead to a severe mis-pricing of a security, which may be the case here as the company trades with a P/E under 5.)
As a result, I wonder if there are particular attributes of this company which encourage or result in short-term thinking. Are there particular industries or companies which lend themselves to short-term thinking, for whatever reason? What are those reasons? Feel free to comment if you have any thoughts on this issue.