Dirk Lever, AltaCorp Capital Inc.
We have all made marketing mistakes. Hopefully we learn from our mistakes so the marketing trip goes better the next time. I have been on lots of marketing trips over the years, so perhaps I can help you learn from the mistakes I have seen (and made) while on the road.
10. Assume All Clients are the Same
There are many types of buy-side accounts out there with different mandates and methodologies of investing. Though you may have one equity presentation, you need to tailor it to the audience, and this means getting to know the buy-side’s mandate and methodology. Build a notebook about the various accounts, and do not be afraid to ask them questions as well, even by way of a follow-up to the meeting. Know your accounts – who owns the shares or does not, and why – and learn to tailor you presentation to the audience at hand.
9. Not Visiting Bond Holders when Marketing
Perhaps it means taking presentations that are debt rather than equity focused, but do not lose the opportunity to reach out to your bondholders to update them. Knowing and keeping bondholders informed of developments can be critical. Do not wait for a crisis to all of a sudden get to know bondholders; consider providing updates to both debt and equity holders on a regular basis.
8. Combating the Buy-side
Though it happens all the time, do not fight with the buy-side – learn to work together! Sometimes the Portfolio Manager may be playing devil’s advocate to get a different perspective. Discord can involve outright disagreement and heated words, but it can also come in the form of refusing to meet with potentially important accounts. Consider what would be gained by arguing with, or refusing to visit, a potentially influential account, just because you may not like the style of investing. The answer is: very little. Be courteous, clear but firm, and avoid arguments, keeping the presentation on a positive tone. You can always discuss further details later, when there is less time pressure and you can collect your data and thoughts.
7. Not Knowing the Industry Landscape and Trends
Each industry can be complex and involve many competitors; make sure you understand your industry thoroughly. Know the key drivers and data points for your business and industry, and consider including an appendix with some of this information in your presentation. It would be very helpful to know how analysts are evaluating your business. Be fully aware of industry trends, both locally and globally, and be prepared to address how these could influence your business.
6. Providing Inconsistent or Incorrect Data
Always triple check your data to ensure that: the numbers agree, add and are consistent with publicly reported information; documents are accurate and appropriately labelled; and tables are clear and labelled. All mistakes should be found and corrected before you are out marketing, so give yourself enough time to have a number of people check the figures and tie them in to publicly reported data. (The process is similar to preparing quarterly or annual releases.)
5. Not Following up with Accounts
Meetings are typically an hour, and a lot can get covered in that period, but questions may arise that you cannot answer. Ensure that you follow up if you said you would, and it would not hurt to follow up with everyone (email is fast), thank people for their time and see if there are any outstanding items. This will show the account that you care. Keep your emails brief. Buy-side accounts typically get hundreds of emails daily.
4. Too Much Reliance on Trade Statistics
We have written about this before, but be mindful that the world of trading securities has changed, and that block trading volumes are lower as many buy-side accounts now use algorithms to effect much of their trade. In addition, the sell-side is not about to refuse a trade order just because someone wants to sell your stock. Remember, without a willing seller, no buyer can purchase your shares.
3. Surprising the Street
If your company has material news, it is far better to get the information out to the Street in a timely manner than to wait for the end of the quarter. There are clear regulations regarding selective disclosure and the need to publish material information in a timely manner. And if one analyst differs significantly from the rest and from your guidance, you are far better to contact this person directly and review the figures together. There may be a good reason for the variance, but the analyst also could have missed some key information. The bottom line is to keep on top of Street expectations and try to prevent avoidable surprises.
2. Adding Complexity When Simplicity is Key
It is very easy to add complexity to your business, and most businesses deal with have some complex issues. However, the IRO’s job is to deliver an accurate and simple message about the company and industry. Do not cloud the key story with a lot of superfluous information. Keep the story simple, consistent and relevant. Investors can add complexity of their own so ensure that you deliver a simple and clear message.
And the number one mistake that IROs make is…
1. Not Summarizing Why to Buy Your Stock
Wrap up your presentation with a summary of why someone needs to own your stock, a summary that derives logically from the material presented. It never hurts to include this summary at the beginning of the presentation, so investors are cued to the information to come, but leave them with clear, logical reasons why they need to own your stock. If the presentation is a good one, the conclusion should flow logically from the presentation.
Dirk Lever is Managing Director, Institutional Equity Research, AltaCorp Capital Inc.