Anil Dilawri » Financial Analysts Taking Investor Relations to the Next Level Fri, 24 Sep 2010 12:25:24 +0000 en hourly 1 We’re Not Ready Tue, 24 Aug 2010 14:47:53 +0000 Anil Dilawri I recently came across an article about an analyst from UBS using satellite images to help in his research of a company. Here’s the article. For the world of equity research, this is pretty mind-blowing stuff.

This got me thinking about the general apprehension of IR professionals when it comes to adopting social media for IR (or for that matter, adopting any technology outside of their basic web presence).

A common phrase I hear when talking to IR professionals about the topic of social media for IR is “Oh, we really are not ready for something like that right now.” In many cases, this is a fair statement.

If you are not ready, that’s fine, no problem. But realize that it is very likely your analysts are ready, your institutional shareholders are ready, your retail shareholders are ready, and the financial media is ready.

There was once a time when companies were “not ready” for live conference calls, not ready for email, not ready for IR websites, not ready for faxing, and not ready for computers. Then one day, they were ready.

Maybe it’s time to become ready for social media within your IR department.

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Analysts are Still Relevant Thu, 28 Jan 2010 21:43:03 +0000 Anil Dilawri This just in – sell-side analysts are still relevant….whether you like it or not.

Following the financial crisis of late 2008 and early 2009, there has been a lot of buzz about the sell-side community getting smaller and the notion that banks and boutiques are moving away from (or drastically changing) their typical research models.

Even if this were true, I would argue that the remaining analysts (let’s call them “the survivors”) have become more important and more influential.

There will always be a market within the institutional shareholder community for specialized, detailed, and high quality research on specific sectors and specific companies.

With this in mind, what is your strategy for 2010 when it comes to:
• Improving the quality of analyst coverage for your company?
• Improving your company’s communications with covering analysts?
• Improving the perception of your management team in the minds of analysts?

Whether we like it or not, analysts still have power.

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Under a Microscope Fri, 27 Nov 2009 21:15:17 +0000 Anil Dilawri There’s a lot at stake when your company communicates with the investment community. It’s more than just your company’s valuation at stake, it’s your company’s reputation.

I recently came across an example of a company that decided to hold a closed conference call with sell-side analysts about future financial guidance. This wasn’t a microcap company that nobody has heard of before. This was a multi-billion dollar market cap company that should have known better.

This was quite obviously an error in judgment and a fairly clear case of selective disclosure.

Think of what a mistake like this does to a company’s reputation. Think of the buy-side institutional shareholder or the retail shareholder who was excluded from the conference call. Mistakes like this are costly.

Even the small details matter. Think about what the cost is to your company’s reputation when you don’t call an investor back after they have left you a message. What’s the reputational cost of having a spelling mistake in your investor presentation or on your IR website?

Everything you do as an IR professional and as a company is looked at under a microscope by the Street. You are always being evaluated, scrutinized, and judged.

The investor communication stakes are high when your shareholders are just seconds away from dumping your stock.

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Continuous Improvement – It Makes a Difference Thu, 15 Oct 2009 18:02:49 +0000 Anil Dilawri Intel – the world’s largest semiconductor chip maker and technology bellwether – maybe you’ve heard of them.

Intel announced stellar Q3 results this week.

As part of the quarterly results process they did something new and innovative. Following the release of the quarterly results they also released CFO commentary for the quarter. Such commentary was traditionally delivered during the prepared remarks portion of the conference call.

From the Street’s perspective, this move was significant for a couple of reasons:

1) It gave the Street more time to digest the commentary surrounding the financial results, thus allowing analysts to ask better and more informed questions during the call.  2) It allowed for more time during the call for questions from analysts.

Intel also adopted the ever more common practice of allowing only one question per analyst in the queue. This is something that makes a lot of sense for a company that has 44 sell-side analysts covering it.

Intel was praised numerous times during the conference call for the new call process.

Sometimes the biggest and the best remain that way because they refuse to stand still and are always looking to improve.

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Please Don’t be Boring…Pretty Please? Wed, 29 Jul 2009 20:16:29 +0000 Anil Dilawri Members of management rarely get excited about investor marketing. It’s too bad because investor marketing can (and should) be the most exciting thing that IR departments and management teams do.

Too often, I have heard of senior executives saying that going on investor road shows is a “pain in the ass”.

I believe the main culprit (and there are many culprits) of this prevailing attitude is that companies are not being innovative when it comes to investor marketing.

How useful is it going to the same locations, meeting with the same investors, saying the same things, handing out the same slide deck, and collecting the same business cards?

There are endless ways to spruce up your investor marketing efforts. It’s not change just for the sake of change either. When you change and improve your marketing efforts your analysts and investors notice. They become interested. They listen instead of pretending to be engaged. They ask good questions instead of questions they already know the answers to. They buy your stock instead of waiting for a better entry point.

Rightly or wrongly, the market has rebounded handsomely since the March 2009 lows.

Rightly or wrongly, investors are deploying the cash they had on the sidelines.

Rightly, your company should want to take full advantage of this opportunity.

Wrongly, you’re likely doing the same old, same old when it comes to investor marketing. The result is, well, mediocre.

Do something new, fresh, and exciting. It will be appreciated by everyone involved.

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Who Reads This Stuff? Wed, 06 May 2009 19:59:36 +0000 Anil Dilawri As the IRO of a publicly traded company, you may be tasked with producing the annual report every year. Have you ever wondered who actually reads that annual report?  After all, the bulk of an annual report these days is historical information that has already been made available to the public.

I can tell you one thing – sell-side financial analysts certainly aren’t waiting in line to receive their copy, hot off the press.

How do I know that?  I recently embarked on a scientific initiative that studied the topic.  I called the scientific initiative “Let’s ask a bunch of analysts if they actually read annual reports”.  Impressive, isn’t it?

I asked 24 analysts, who cover various sectors, if they actually read the annual reports of the companies that they cover.

8 out of the 24 admitted that they don’t refer to the annual report at all.  A whopping one third!  And that’s only the analysts who would admit it.  The vast majority of the remaining analysts mentioned that they only “skim” the annual report for any new or relevant information.

Something to keep in mind the next time you are evaluating the time, energy, and money spent on your annual report.

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Technology, the Flu, and Investors Wed, 29 Apr 2009 21:00:42 +0000 Anil Dilawri The recent outbreak of Swine Flu and its spread throughout the world has taught us a lot. Many are drawing parallels between the recent outbreak and the pandemic flu of 1918. However, a lot has changed since 1918.  Aviation technology has meant the spread of the actual virus is faster and more widespread. On the other hand, information technology has allowed for information about the virus to move around the world more efficiently and effectively than in 1918.

Websites, internet news feeds, Twitter feeds, Youtube videos, 24 hour television news reports, cell phones, instant messaging, and much more. It has all made us more aware of the situation and more equipped to make individual and collective decisions.

Now, imagine for a second that you as an IR executive were able to effectively use technology to get important information to investors and analysts in a timely and consistent manner.

Let’s say your CEO resigned today….unexpectedly.
You have hundreds of calls from people asking thousands of questions.
You and your team issuing a press release, returning emails, and answering phone calls is not a scalable approach in today’s world. Someone, somewhere is going to be left wondering why they never got a call back (and it’s usually someone important).

Technology, and specifically social media, is all about scalability. A consistent message can be issued by one person (the IRO) to thousands of people (analysts and investors) at the same time. Rumors can be addressed, questions can be answered, clarifications can be made, and even mistakes can be quickly corrected.

In today’s IR world, technology matters.

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The Juiciest Part of the Call Tue, 07 Apr 2009 15:49:46 +0000 Anil Dilawri What is the juiciest part of a company’s quarterly earnings call?
It’s not the financial detail.
It’s not the CEO’s prepared remarks.
It’s not reiterating a story that has already been told in the earnings press release.

It’s the question and answer portion call.

It’s unscripted.
It’s not staged.
It’s where you get to hear what analysts (the Street) really want to know.
It’s where you get to hear what management really thinks.
It’s where you get to hear how good (or bad) management really is.

Now, ask yourself, how long does your company’s management team spend on preparing for the Q&A? Perhaps more importantly, are they preparing in the right way?

As one analyst put it – the prepared remarks is where I find out how good the company’s writers are. The Q&A is where I find out how good the management team is.

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Some Companies Just Get It Fri, 20 Mar 2009 20:26:41 +0000 Anil Dilawri Oracle gets it.

Oracle announced its Q3 earnings on Wednesday.  They surprised the Street by exceeding expectations and issuing guidance that at least one analyst referred to as “prudently cautious”.  But that’s not what stands out for me.  What stands out for me is the introduction of a dividend.

Typically, growth oriented companies hesitated to introduce dividends because if often signaled that a company was moving away from growth and more towards maintenance of its current revenue streams.  One may argue that Oracle traditionally thought of dividends in this way.  But times have changed and Oracle is changing along with it.

Investors these days are clearly looking for safety and income.  They wanted a dividend from Oracle and that’s exactly what Oracle gave them.

Let us never forget that the investors of our companies are the owners of our companies.  Sometimes, just sometimes, it’s a good idea to listen to them.

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Obvious? I Wish. Fri, 20 Feb 2009 17:08:33 +0000 Anil Dilawri I recently came across an analyst research report that simply stated the following:

“We are suspending coverage on <<anonymous company name>> as we have been unable to access management to discuss developments at the company. Our previous ratings and fair value opinion are no longer valid.”

So, let me get this straight – an analyst is covering your small cap company and wants more information about your company so that he can get more investors to buy your company’s stock. 

Sounds like an important stakeholder to me. 

Unfortunately, he can no longer cover your company because he can’t get enough (or any) information from you about the company.  You won’t return his calls and emails and you won’t meet with him.

Hmmm.  Not exactly a recipe for success when it comes to IR.

Not only should your company be talking to sell-side analysts, you should have a regularly updated strategy of how to effectively engage each analyst that covers you (or may cover you).

An Investor Relations Officer (IRO) once said to me – “We don’t speak with that analyst.  He doesn’t like us.”  This may sound ridiculously obvious, but, that’s not the kind of analyst engagement strategy that leads to an effective IR program.  I wish these kinds of statements from IROs were rare….but they’re not.  They are actually far too common.

No matter what the size of your company is, you need to get your analyst engagement strategy in order.  In most cases, you need them more than they need you!

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