Tonight, small towns across America will shut down. Businesses will close early. Farmers will abandon their fields. Police will block off roads.
High school football is back…
Back in my hometown, the marching band will play “On Wisconsin” when the players run out onto the field, eager to hit a kid from the next town over. They’ll play it again at every score.
The stands will be full of oil-stained old men with calloused hands wishing for a whiff of smelling salts and a chance to partake in that coordinated chaos just one more time.
It can be difficult to explain to non-Americans what football means to innumerable little towns in this country. It’s not a game. It’s an institution.
As you might have guessed, yes, I played high school football. Now I’m coaching in a small central Virginia town near where I live.
Maybe it’s a cliché, but football really can teach you a lot about life – teamwork, sacrifice, working towards goals together, all useful lessons.
We have several three-word mantras for our kids – “Together we win,” “Do your job,” “Iron sharpens iron.”
But my favorite is “Read your keys.”
This week we’re preparing for an opponent that runs the single-wing offense, and I can’t tell you how many times I’ve said it to a bewildered player who’s seeing plays from Pop Warner’s century old-strategy for the first time.
“Read your keys” means to focus only on what’s most important and avoid unnecessary distractions.
If you’re an investor in these crazy markets, I have the same message for you: Read your keys.
A Prime Example of Focusing on the Wrong Thing
In a world of artificial intelligence and algorithmic trading, sometimes we forget that markets are just people making decisions. And people get distracted by immaterial variables or uneventful noise. They make mistakes, in other words.
Look at Intuit (INTU), for example. The stock sold off post-earnings, despite a wonderful quarter and a double-digit dividend increase.
In my humble opinion, that’s a mistake. The market became too focused on short-term valuation fears rather than focusing on the bigger picture – Intuit’s fundamental growth and generous shareholder returns.
During the recent quarter, Intuit posted revenue growth of 20.4%.
This result pushed the company’s full fiscal year revenue up to $18.8 billion, representing 16% year-over-year growth.
Each of the company’s operating segments did well, too.
Intuit’s Global Business Solutions segment posted 16% growth. Its consumer group posted 10% growth (bolstered by TurboTax Live’s 47% sales growth). And its Credit Karma business saw 32% growth.
Looking at the bottom line, Intuit’s full-year non-GAAP (generally accepted accounting principles) operating income totaled $7.6 billion (up 18% year over year). That’s a 40% profit margin.
Looking at non-GAAP earnings per share (“EPS”), we saw 19% year-over-year growth. There was 16% revenue growth… 18% operating income growth… and 19% EPS growth.
What’s not to like?
Apparently, the guidance.
During the fourth-quarter conference call, Intuit’s management team laid out guidance for fiscal 2026. With the stock falling by double-digits recently, you’d assume that they highlighted poor growth prospects, right?
Wrong.
The company’s updated guidance points toward 12% to 13% revenue growth for the year and strong margins.
Management highlighted longer-term goals for its product suite, calling for:
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15% to 20% growth from its Global Business Solutions Group segment
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6% to 10% growth from TurboTax (with TurboTax Live growing at 15% to 20%)
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10% to 15% growth from Credit Karma
Lastly, management showed their confidence in the company’s output potential by raising the dividend by 15.4%.
Like Brad loves to say, “The safest dividend is the one that has just been raised.”
Intuit’s board of directors wouldn’t have approved a 15% increase if they weren’t confident in the company’s cash flows moving forward. And yet, despite all of this, Intuit shares are crashing.
It’s not that the guidance was “bad.” It just wasn’t as good as Wall Street would have liked.
Somebody’s not reading their keys…
INTU is a recommended buy in our model portfolio with The Wide Moat Letter. So, for any paid-up subscribers, consider this an informal update on the position. And just know that I wouldn’t worry too much.
In fact, this disconnect between fundamental growth and share price creates an opportunity for patient, long-term investors.
The Market Makes Mistakes
This happens all of the time on Wall Street. It also happens in football.
If a middle linebacker gets distracted by action in the backfield and forgets to crash down and fill a gap when a guard pulls, he’ll give up a big play. Mr. Market is just like the middle linebacker, focused on the wrong thing and setting himself up for failure.
Reading your keys as an investor means focusing on what matters. And what matters is fundamental growth, balance-sheet health, and shareholder returns.
Intuit just posted 19% earnings growth. The company has $6 billion debt on the books, compared with $94 billion in cash/restricted cash equivalents on the balance sheet. This allows it to maintain a credit rating of A- from S&P Global. And the company just raised its dividend by 15%, marking its 14th consecutive year of annual increases.
That’s what matters. Focus on that.
Over the long term, fundamentals dictate the direction of a company’s share price.
Don’t worry about near-term fear. Happily ignore the latest Wall Street analyst downgrade. Instead, focus on the company’s rising profits and growing dividend.
That’s what it means to stay focused. That’s what it means to read your keys. That’s what will allow you to take advantage of compounding and generate significant wealth over the long term.
Regards,
Nick Ward
Analyst, Wide Moat Research
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