Morning Meeting: Rules of Engagement

By Derek On January 17, 2012 Under Post

Do you understand what you read?

In earlier post I wrote about how the morning meeting in equities is the most sacred part of the day. One of our readers was interested to know: how do you drill the analysts and what kind of questions do you ask? I thought, great! Now I know what to write for my next post. 

(If you aren’t familiar with the morning meeting ritual, you may first want to read that post here).

Sales people speak to clients daily communicating the analysts views and changes to those views on stocks. To speak effectively to clients, we need to understand exactly what the analyst is saying – and why. You don’t want to just parrot the research and, oh God, how many times have I seen sales people do that without knowing what the hell they are talking about. If you don’t understand, ask. There are no stupid questions but there are a lot of inert, unenlightened sales people who remain in an intellectual fetal position due to their fear of asking questions. Remember, if you don’t ask questions you will never know more than you know right now – which isn’t very much. 

Rules of Engagement: 

1) Don’t ask a question because you like the sound of your own voice.

2) Keep your questions as short as humanly possible. We all want to get out of there.

3) Don’t embarrass the analyst in public unduly. A little will suffice.

4) Thank the analysts for their answer (and write it down in your brokers book).

It is useful to remember the purpose of the morning meeting: this is the venue to get everyone together and discuss and learn what that day’s “message” to clients will be. As a sales person you must go in there prepared. Only losers or those who already have another career picked out, show up to work a minute before the meeting starts. You should be at your desk early and have digested all the overnight market action and news before the morning meeting begins.

Take a look at the analyst report while they are presenting and think; what is the story and is it relevant? Who is it relevant to? Do I understand it? What don’t I understand? You will be on the phone with a client afterward and you don’t want to look or sound any more stupid than you already are so you need to get an idea of what the gist of the report is. You can read the note more thoroughly after the meeting so don’t worry about getting 100% of it up front. But when you don’t understand some of the reasoning it is time to ask a question. Let’s look at some examples.

A “Buy” note?

You Ask:         I see this stock is trading at 18 X PE and has 10% earnings growth. It sounds expensive. Why do we have a Buy on it at this level?

Analyst:         This stock is always expensive.

You Think:    That isn’t a compelling argument. Forget about it.

 

A sector initiation or stock initiation?

You Think:       This 150 page report would break a bathroom tile if I dropped it. No client on earth is going to read all of this. What do I need to highlight to them?

You Ask:          You have put a lot of effort into writing this report. Can you tell me where we differ from consensus?

                        or 

                          This is a massive report. What three main points do you think clients must know here?

 

A stock downgrade after the stock has fallen 50%.

You Think:       Jeez. Little late on this call, Bozo.

You Ask:            I see the stock has already come down 50% from its highs. Why do you think there is more downside? Shouldn’t we be buying it here?

 

A “Hold” note.

You Think:       This is useless. How long do I tell clients to “hold” this for?

You Ask:          I see this stock is a Hold. What do we need to see for you to upgrade or downgrade it from here? How likely is that catalyst?

 

A sector update or review.

You Think:       Is there anything new here or is this just maintenance research?

You Ask:          Any changes to views on stocks here?

 

Finally, don’t monopolize the morning meeting with your questions (remember rule number one). Let other salespeople speak. This is common courtesy which is a misnomer since it seems quite uncommon in practice. I limit myself to a maximum of three questions to a particular analyst on a particular story. If I have any more questions I call the analyst after the meeting and speak to him or her. If you work in the same office then don’t call the analyst, walk over to their desk and ask them face to face. You get much more information that way and it helps build the relationship. Remember, although some may not look like it, analysts are people too.

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