Visiting Listed Companies – Why and HowBy Derek On February 8, 2012 Under Post
“Stand out. Make noise.” – Jon Bon Jovi
Bill Gates: An Early Attempt to Stand Out
The financial industry is super competitive and if you want to thrive you first have to survive. A good way to do this is to stand out from the crowd and do something your competition isn’t.
A large part of the job, whether as an analyst, a salesperson or a fund manager, is visiting listed companies and learning as much as you can about them. We do this pretty much every day and it is the best way to get to know a company and stay on top of important developments and trends. Meeting senior management is also often useful for the intangible benefits of getting a feeling about how “real” or “sustainable” their story is. We all want to invest in undervalued gems that have a great story as yet unrecognized by the broader market and the best way to do this is to get off the couch and go see the company yourself.
When speaking to clients it is often a door opener to say something like:
You: “Hello Fritz, Elmo here at Big Bird Securities. How are things?”
Client Fritz: “Hello Elmo. Same old. Markets go up. Markets go down.”
You: “Fritz, I just saw Wing Ding Textiles this morning and they told me something very interesting.” Pause.
Client Fritz: “Really? What did they say?”
And off you go about how wage increases in southern China are so out of control that Wing Ding is thinking of moving to Vietnam. You can use this information to build a story about listed companies that own industrial land in Vietnam and how cheap they look and how demand for that land is only going to skyrocket etc, etc, etc.
Don’t Be a Seagull
“Fresh intel” with a unique spin to it will make your call to clients stand out. This makes your competition just a bunch of seagulls, regurgitating cold research, while you are out in the field bringing down big game. Go Nimrod.
Company visits are easy to arrange by calling the investor relations department. It is their job to meet investors and is a good place to start. If you are bringing a client then you can try and get management of the company in the meeting as well. Some big clients do not want to see IR people but only senior managers. From a listed company’s point of view, a “big client” is either a current major shareholder or an institution that has at least tens of billions of dollars under management. Try for the CEO and work your way down from there.
Make sure you have a written profile of the investor and his fund that you are bringing. Use this to set up the meeting. If your client is a hedge fund some companies may look at this with less favor. Not all hedgies are flippers though; some are fundamental long term holders of stock. Tell them your client is one of these.
At the time of the meeting you will be led into the room and usually management will not have arrived. Give the client the middle seat at the table. You, as an analyst or sales person, should sit unobtrusively at their side. When management enters, stand up and introduce the client first – not yourself. You don’t matter. You are just a facilitator. After the client gives his business cards to management you may introduce yourself and give them your card as well. There is a right way and a wrong way of doing this without looking like a schmoe. For more on business card etiquette – and it is important – see the post I wrote here.
If you are trying to arrange a meeting for a major shareholder to see a company and senior management is always “busy,” I take this as a very bad sign. This usually means things are not right and they really don’t want to see shareholders now. The best course of actions: Sell. Run for the hills! I have never seen a situation like this work out well for shareholders.
Another one of my favorite warning signs is when senior management lies to your face. I always look for this and, in fact, to prevent me from being led down the garden path and believe everything this nice man is telling me; in every meeting I always ask myself, “Why is this person lying to me?” Rather than slavish canine acceptance of everything presented, I find this helps trigger a more analytical thought process. This isn’t to say management often lies but if you look at it from that angle you may discover something.
Now, on at least three occasions I have had management lie directly to my face and I KNEW it at the time.
Whenever senior management cautions you in confidential tones and says something along the lines like, “So you see, our outlook is good but things at the present moment are not so good. I really wouldn’t recommend people accumulate our shares right now.”
BULLSHIT! This should peg the needle on your BS meter. When they say this what they mean is: “Our shares are very cheap and I am busy buying them and don’t want any competition until I am done.” Sure enough, in each case these listed companies were doing just that when they told me this and it was the bottom for the stock. A perfect time to buy.
Take copious notes during the meeting and make sure the client’s questions are being answered. Don’t play with your phone, Blackberry or fall asleep during the meeting. Falling asleep, snoring and drooling is just bad form. I have this weakness, I admit. But after several close calls early on in my twisted career I discovered a secret method to make sure this never happens. Read about it here.
Thank management at the end of the meeting and don’t discuss it with the client until out of the building. If the client thinks the company is a joke make sure he doesn’t say that in the bathrooms (you never know who is lurking in the stalls) or in the elevator (again, who is there with you?). Once outside, I always ask, “What did you think of the company?” And be prepared to discuss it intelligently. Clients often want someone else’s opinion, especially if that someone else is not an idiot. Staying awake and taking notes will help ensure you don’t slip into that category.
Back in the office you can call clients and talk about the meeting as long as the client you took there doesn’t specifically request you don’t do that. Sometimes they may want a day or two to do more work on the idea and will ask you to sit tight until they are done. Respect those wishes. Otherwise, feel free to talk about your meeting with other clients. I would wait a few days to put it in an email though.
Visiting companies and meeting management is a great way to differentiate yourself, get out of the stifling environment of the office and help you get a deeper understanding of the market and the players. Clients will also appreciate it and pay for your efforts as well. Give it a shot and let me know how it goes.
Derek Hillen, CAIA