Is This the Real Reason WestJet (TSX:WJA) Decided to Sell?

The sale of WestJet Airlines Ltd (TSX:WJA) to Onex could give investors some valuable insights into why there might be too much emphasis on the short term.

There’s been a lot of movement in the airline industry lately. When WestJet Airlines (TSX:WJA) announced that it was being sold to private equity firm Onex, it raised some eyebrows. The company, at least in the beginning, had prided itself on employees owning shares of  the public company.

And while many of those employees will get some nice payouts as a result of the deal, WestJet’s CEO Ed Sims hinted that there may have been another factor that motivated the company to go private. Sims told BNN Bloomberg in a recent interview that he felt there was too much “short-term thinking” surrounding public companies.

In the interview, he said that the company’s asset purchases are for the long term, and yet investors are focused on short-term numbers and goals.

He said, “When you’re constantly being asked every three months to re-evaluate whether every individual strand of that strategy is profitable in its own right, it can encourage short-term thinking and a transactional approach to the way that we build our fares and the way we look after our 25 million guests every year.”

It’s a valid question that again brings to light the question of whether quarterly earnings reports are simply too frequent. With so many things that can impact a company during a three-month window, it certainly puts a big incentive on companies to focus on getting the short term right. And so when you’re buying assets or making decisions with the long term in mind, it’s not necessarily in alignment.

Ironically enough, if a company focused on the short term and neglected the long term, a case could be made that it’s not a very good investment. And yet, investors seem to want both and are quick to punish companies for missing earnings by a few cents or not having a bright forecast for the upcoming year.

The frustration by Sims is apparent, and it could be that the company preferred to take the deal partly to rid itself of the constant headaches and questions coming from earnings calls and the scrutiny that comes with being a public company. It’s a pressure that private companies don’t have to worry about, especially when there’s only a few people that have ownership.

Bottom line

For investors, Sims’s words are an important reminder that too much weight shouldn’t be given to the short term. A company missing or falling short of expectations doesn’t mean that its business model is now somehow flawed or that its business is no longer worth what it was just prior to earnings.

With more data and forecasts available, there’s a danger that investors are over analyzing and making decisions that might be too short sighted or based on too small of a sample. The good news is that for investors that can ignore the short-term noise, there can be real bargains to be had in the market for stocks that suffer from overzealous investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor David Jagielski has no position in any of the stocks mentioned.

More on Investing

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Is Magna Mining a Good Stock to Buy?

Magna Mining is a Canadian penny stock that trades at a cheap valuation in June 2025, given its growth estimates.

Read more »

A worker drinks out of a mug in an office.
Dividend Stocks

Dividend Investors: Why I’d Buy Telus Stock Over BCE Any Day

Telus (TSX:T) has a higher dividend yield and potentially more attractive comeback story.

Read more »

Canadian dollars are printed
Stocks for Beginners

Transform Your $7,000 TFSA Contribution Into a Wealth-Building Machine

Looking to turn your TFSA into a wealth-building machine? These stocks can help do that and much more, all on…

Read more »

Canadian energy stocks are rising with oil prices
Dividend Stocks

Should You Buy This Energy Stock for Its 9.4% Dividend Yield?

Alvopetro Energy is a high yield dividend stock that trades at a cheap multiple in June 2025, given its growth…

Read more »

worker holds seedling in soybean field
Dividend Stocks

1 Stellar Canadian Stock Down 42% From All-Time to Buy and Hold Forever

Not only is this dividend stock a great long-term buy for income, but also for its value.

Read more »

grow money, wealth build
Dividend Stocks

High Yield + Growth: 2 Generous Dividend Heavyweights to Buy Today

Enbridge (TSX:ENB) and another dividend stock prove you can have gains, superior dividend growth, and high upfront yields.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

Retirees: How You Could Earn $466 a Month in Dividends With Less Than $100k in Savings

Canadian retirees should consider owning blue-chip TSX dividend stocks such as Enbridge to generate a growing stream of passive income.

Read more »

senior man smiles next to a light-filled window
Dividend Stocks

Retirees: Use a TFSA and Generate Tax-Free Income, Plus Avoid the OAS Clawback

The TFSA is a great way to create income for life, especially with a dividend stock like this.

Read more »