Long-Term versus Short-Term

01 April 2010

A significant problem in today’s equity markets is that companies tend to be managed to thrive for the long-term while institutional investors tend to be preoccupied with success in the short-term.

“That’s great, I love your 5 year plan, but what are you doing to get the stock price up in the next 3 months?” said the money manager who was speaking to a CEO.

This becomes a significant communications challenge for IR as they craft the company’s message to investors.  Long-term is important to us (the company) but short term seems to be what matters (to investors).  What’s an IRO to do?

What if companies made the link between short-term deals/news/developments and the long-term vision. Imagine if you gave investors a roadmap they could follow as they judge whether or not to invest in your company.

Example – “We drilled a hole in the ground and found some gold.  Next we are going to drill a few more holes to see if we can find some more gold in the area.  We will then move quickly to scope out how much gold is in the area and develop a strategy for extracting it.  This will all lead to our ultimate vision of becoming a producer of gold within X number of months/years.  You can expect another update from us in <<insert timeframe>>.”

It sounds simple but too few companies do it.

Google has ambitious plans for the future, and they talk a lot about those plans, but investors don’t mind because Google delivers outstanding performance in the present.  They knock down short-term milestones while keeping their eye on the ball for the long-term.

Lay out a map for your investors.  Let them follow along as you progress (short-term).  Emphasize how you are meeting your stated objectives.  Keep reiterating the end goal (long-term).

Listening and Investor Relations

25 March 2010

If your company (and IR department) is like most it likely spends a lot of time preparing for earnings calls, writing press releases, answering investor questions, answering analyst questions, updating websites, updating contact databases, traveling, presenting at conferences, talking to financial media, organizing and executing an analyst/investor day, writing an annual report, and watching the stock price.

Correct?

How much time does your company (and IR department) spend listening to your investors?  I don’t mean listening to their questions and then answering them.  I mean listening to their opinion, listening to their thoughts, and listening to their beliefs (regardless of whether you agree with them or not).

If your company thinks market share growth is the most important success metric but your investors think its earnings, who is right?

If your company thinks that you are leading the pack but your investors think the competition is eating your lunch, who is right?

Listening is a powerful way of crafting an IR message that directly addresses (and guides) an investors opinion.

Take the time to actually listen to your investors.

Why the Street Pays Attention to Your Marketing

24 March 2010

Does the Street care about the front line marketing of your company (branding, promotion, etc.)?  Do they care about your logo, your latest Super Bowl ad, or what super model is promoting your product/company?

I would say yes, but only if your front line marketing is driving exceptional performance.

The great example of this is Aflac and their use of “the duck”.  As was featured in a recent article in the Harvard Business Review, “the duck” was a game changer for Aflac.  What seemed like a weird and whacky ad campaign idea turned out to be the driver for Aflac’s growth over the next 7 years.

7 years after the launch of “the duck”, Aflac’s market cap increased by over 200%.

In three years, sales in the United States doubled.

In two years, name recognition was up 67%.

Sales and market share in Japan exploded.

Today, “the duck” has over 170,000 fans on Facebook.

The company, and more specifically the CEO, took a big risk. That risk paid off.

Great marketing strategy, great marketing execution, and great results that drive overall performance – the Street cares about this.  Don’t be surprised the next time an analyst asks about the details of your upcoming promotional campaign.

Analysts are Still Relevant

28 January 2010

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.

Under a Microscope

27 November 2009

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.

Is 10000 Really That Big of a Deal?

23 October 2009

Last week, the media was all over the fact that the Dow had surpassed 10,000. You cannot doubt the impressive run that the Dow has had since closing at 6547 on March 9, 2009.

But is 10,000 still an impressive threshold?

The Dow first closed above 10,000 on March 29, 1999. That’s over a decade ago for those of you who are counting. Not to mention that the Dow has crossed the 10,000 point mark more than a dozen times over the past 10 years.

Psychological threshold – yes.
Impressive – not so much.

Continuous Improvement – It Makes a Difference

15 October 2009

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.

Where do we find the time?

08 October 2009

Last week I had the privilege of presenting to a group of IR professionals at a CIRI Ontario event in Toronto. The topic of discussion was social media and investor relations.

Some great thoughts, perspectives, and questions were raised by intelligent minds such as Annemarie Brissenden, IRO at North American Palladium, Alvin Poon, Manager of Investor Relations at TD Bank Financial Group, and others.

A question that was asked was “How much time, as an IR professional, should I spend on social media?” and more importantly, “Where do I find the time to participate in social media?”

Many so-called social media experts have a variety of responses to these questions. In my opinion, the amount of time you should spend on social media is a very personal decision. If you are trying to figure out what is best for you, here is one way of thinking it through:

Think about how much time during the day you spend reading the newspaper, watching TV for news purposes, watching TV for entertainment purposes, reading magazines, reading industry journals, reading analyst reports, listening to the radio, reading email, reading speech transcripts, developing and delivering presentations, and attending conferences or presentations. You make a conscious and personal decision about how much time and effort YOU put into the activities listed above. In the same way, you need to make a personal decision on how much time you spend participating in social media activities. For some IR professionals it’s 4 to 5 hours a day. For others, it’s 15 minutes every second day.

Social media will continue to play an ever-growing role in the world of IR. It’s time to make a decision on how much time you and your IR program should be spending on social media.

The IR Presentation

25 September 2009

Here are five questions to ask yourself as you revamp your company’s IR presentation:

  1. Does this slide really add any value?
  2. I understand this slide, people in my company understand this slide, but would a new investor understand this slide?
  3. Are we differentiating our company at all with this presentation?
  4. Does this slide work without a voice over?
  5. This slide introduces a new metric. Will the presentation and analysis of this new metric continue to be in our favor next quarter or next year?

Taking it Up a Notch

23 September 2009

Some IROs really get it!

Lately I have had some encouraging conversations with some senior IR professionals who are interested in taking their IR programs to the next level.

These IROs are not satisfied with the same old, same old. They are changing the way they market to investors, they are changing their IR presentations to be more meaningful and less mainstream, they are taking a serious look at social media as opposed to dismissing it, and they are being less ad hoc about the way their program operates.

Some say “if it isn’t broken then don’t fix it”.
Others say “if it is working, how can we make it work better?”

Companies (and IR programs) that continuously evaluate, evolve, learn, change, innovate, and tweak get noticed by the Street.