April 20, 2011 - Investors always want more. They can't help it. It's their genetic makeup. But sometimes, less is more. Take, for example, a lower earnings report in one quarter due to hiring new employees. Or due to heavy capital expenditures. When these are the reasons for less, investors should be pleased. Investing in the future is what every company needs to do to deliver on investors' expectations.

The reason for investors' wrath: more new employees, a bonus and 10% salary increase and more marketing expenses. In other words, the company is adding new people for new projects or to help expand current ones. It's also rewarding the employees who have made the company a success. And it's increasing its marketing effort to gain more market share. All of these are current investments that will most likely pay off in the future.

Of course, they most likely won't all be successful. Some will. Some won't. But that's the nature of business. As Wayne Gretzky once said: You miss 100% of the shots you don't take. If management isn't willing to take some risk, to invest now for future reward, then that company won't make it. Only companies that are growing can survive. Ones that don't, won't.

Why? Because if a company is standing still, its competition isn't. That's the nature of capitalism. When one company makes good profits, other companies will come after the same market, so they can have some of those profits. The only way to stay ahead of competition is to invest in people and equipment. Part of investing in people is to make sure you keep the ones who have made you successful. Another way is to hire new ones with new ideas for new projects.

A deeper look into why the stock got hit might suggest that Larry Page, the newly returned CEO and founder of Google, didn't stick around for questions after the conference call. He's never been a Wall Street favorite because he used the Dutch Auction for bringing Google public, which basically cuts out Wall Street from its usual large commissions for IPO's. By skipping out early, analysts weren't too happy with him. But they've never been too happy with him.

Basically, Page decided to focus on his company rather than on Wall Street. He's looking to the future, not the now. He knows he has to keep his good people. (If he hadn't given out bonuses and pay raises, the comapny certainly would have hit analysts' estimates.) He knows he has to hire new brains to keep the company growing. He knows he has to invest in marketing to keep his market share or grow it. Isn't that what good management is supposed to do?

As always, investors need to look behind any headlines. It's natural that when a company misses Wall Street estimates, the stock will go down. But there is no reason for losing chunks of market cap when the reasons for the miss all add up to a stronger, better company, one that is preparing for even better earnings. While Google didn't lose money, even if it had, sometimes a loss or missing earnings, for the right reasons, can be a good thing.