As football followers, most of our disappointment stems from our expectations not being met; whether by a particular player or the team as a whole. This is why AFL clubs tend to keep their expectations in-house. Goals and aspirations discussed internally are not necessarily expressed externally. The theory is that clubs don’t want to provide the opposition teams with a hubristic attitude or further motivation to knock them off. Fans are in turn left to formulate their own expectations of the future ahead (or are left with a heavy heart in the rare instance where a club has actually let the expectation cat out of the bag and failed to deliver). Such issues don’t exist for investors, though. Analysts are constantly moulding our expectations about company profits based on their own forecasts, and up until recently, the outlook statements from management. Come reporting season, when companies release their financial performance, investors react in the same manner as footy fans (minus the membership card and the scissors). It’s all about expectations being met. Clients often ask me: “How is it that BHP announces a $12 billion profit, yet its share price falls two per cent on the same day?” The answer is simple – expectations weren’t met. The market, more specifically, BHP shareholders, expected an even higher profit figure and reacted by selling the stock when they didn’t get it. A company may have met the expectations for the previous period, but might warn investors that trading conditions are likely to become difficult, and that earnings won’t be expected to grow at the same rate as last year. So, even though the profit met the expectations, the share price of that particular company will likely fall. Imagine how you would feel as a supporter, if your team met your expectations one year, but followed that up by saying that they expect to finish bottom four the next. This reporting season saw company management taking a leaf out of the footy club rule book about how to set expectations. Due to the uncertain operating environment, most companies failed to provide earnings guidance. Analysts and shareholders have been left to their own devices to predict what future earnings are likely to look like. The job of an analyst is hard enough having to forecast future cash flow and measure intrinsic value, let alone not being told what to half expect going forward. Good on JB Hi-Fi for telling shareholders to expect a five per cent increase in sales on the previous year. Yes, the impact of increasing costs and consumer behaviour on businesses is sometimes as difficult to predict as player injuries, but companies should stick their necks out a little more and give investors something to aim for, rather than hide behind the usual economic uncertainty line. This particularly applies to companies that missed expectations. A disappointing earnings result and no guidance is asking for share price trouble. Management need to get on the front foot and provide light at the end of the tunnel, no matter how dim. Whether you invest your time, money, energy and heart in your footy team or a company, disappointment is sometimes inevitable. That’s the thing about expectations – if not met, they can sting more than the figure on the scoreboard or the closing price in your portfolio. But come this time of year, that’s what they’re both about. * Sam Fimis is a private client adviser with Patersons Securities and author of Premiership Portfolio: 6 Step Guide to Succeeding in the Stock Market. To learn more about Premiership Portfolio, visit www.premiershipportfolio.com