YWR: 10 Hacks for a Great Investor Mtg.
Professional investors meet with companies all the time. It’s a big part of the job. And yet, they mostly do a terrible job getting anything useful out of these meetings. They spend way too much time on irrelevant topics, don’t manage the clock, and are afraid to ask the tough questions.
These meetings are a bit of a game. Every company has a secret, a weak point they are trying to hide, or a public narrative they are trying to project. The Japanese call this public face the ‘tatamae’, while the ‘honne’ is the hidden truth. In these meetings company management will try hard to stick to their script, their slides, control the narrative, and put up the image they have prepared and planned. It is your job, in the politest way possible, to find the loose threads that lead to the honne behind the tatemae.
Here are 10 Hacks to get more out of your 1 hour company meeting.
Go to their office: This hack sets the tone for everything. Yes, we can do Zoom calls, but now more than ever make the effort to visit companies in person at their offices. It seems inefficient, and more expensive, but it’s worth it. You will learn unexpected things. You know how with Zoom, you can wear a shirt and tie, but below the screen you can be wearing your underpants? It’s like that. Go to a company’s offices and see if they are wearing underpants. See where they are located. Are there inspirational posters on the wall? Does the coffee machine work? What is their world like? What do they look at all day? Is the parking lot busy? Are they across the street from the competitor? When they walk you to the meeting room is everyone chatty and engaged, or does the office feel dead? What’s the vibe?
The other big reason for going to THEIR office is the CEO/Management will be more comfortable and open. They know they aren’t being recorded and they feel safe. It’s home turf. They will share things and introduce you to other people on their team which wouldn’t happen on Zoom. They might have a new product prototype of something they are building on their shelf, which they will pick up and talk about.
Don’t use a laptop: I hate at conferences when you have to share a meeting with analysts from another firm, and they all get out their laptops and type the whole meeting. They look up to ask a question, then put their head town to type while the CEO is talking. That is such rookie BS. If you are going to do that then don’t even take the meeting. Just read transcripts from the conference calls. Who is going to open the kimono and say something they shouldn’t when you are sitting their typing every word into your computer.
Here is my strategy. Have a notepad, it’s less noticeable than a computer, but use it sparingly. Instead of writing look at the management while they are talking and remember, with your brain, the key points. If they are saying something super important do not stop and write it down. That breaks the flow and makes them wonder if they shouldn’t be saying what they are saying. Instead smile and let them keep talking, agree periodically, while you fuze these points into your memory. After the meeting ends quickly go somewhere (coffee shop, your car) and write down what they said. But don’t do it when they are talking. Let them spill the beans.
The Top 2-3 things: Go into the meeting with 2-3 very clear things you would like to know/ask. It doesn’t have to be 3, it can be 2 or 1. The key is you aren’t going to get sidetracked. You are going to bring up these topics and hear the response.
Know the numbers: Have the key numbers in your head from the last earnings report. Know what was the quarterly growth rate, vs what was the yearly growth rate, etc. It is useful to know the key numbers in your head because you will know when the management is cherry picking what they want to talk about. “The year is doing well, we’re up 15%” when you know all that growth happened in Q1, while Q2 and 3 have been flat. So you have a BS’er on your hands.
Meet companies when they are doing terribly: When a company is doing well, their stock price is making new highs and they are beating numbers, they will feel cocky and don’t need to talk to investors. The meetings are semi-useless. The opposite is true when companies are doing poorly. I love to meet companies when nobody wants to talk to them. In fact when I go to big conferences I ask the organiser which companies nobody wants to meet and can’t fill their slots, and then offer to meet with one of them. Conference planners love that I take these meetings. Don’t overload on them, but be open to 1 or 2.
The secret with these companies is there are lots of things that are easy to talk about because the bad news is all public. They can tell you everything they are doing to fix the problem. They might also tell you something interesting about the industry or their competitors. They are eager to talk to you because everyone else ignores them. Do be careful that bad companies can also be a waste of time and just desperate for investors, like at mining conferences. The ideal situation is a good company, going through a bad patch. Take the opportunity to visit them and have a meeting and be constructive about what they are doing to fix the problem. Be positive and listen to their story when no one else will. It will be the best meeting you do.
The Friendly 5. This timeline is for a typical meeting with a company doing relatively well, not the depressed cases mentioned above in point 5. Spend the first 5 min being friendly. If the meeting is in your office get people their coffees. Be a good host. Note coffees great for making people talkative. Try to get some coffees going. Then ask them how the trip is going. Be interested in something personal about their life. Remember, ‘interested is interesting’. These random personal stories are sometimes useful later for unexpected reasons. If you have met the company before reference something personal they said from the last meeting. “How did the Alaska fishing trip go? Did you catch that salmon you wanted?” It sets a friendly tone for the meeting, at least at the beginning. Don’t spend too long though on friendly chit chat. After 5 min you want to wrap it up and get into your first topic.
Beware the chatterbox: This doesn’t happen very often, but I want you to be on the lookout for it. The typical format for these meetings is an hour. After an hour a broker, or the CEO will say they have to go to their next meeting (even if they don’t). Remember, their goal is to meet for an hour and get through the meeting without saying something they shouldn’t. They want to be polite, deliver the message, stick to the script, give the prepared answers, etc, and get out. There are so many regulations around corporate communication that they are nervous. Their usual strategy is to be tight lipped and controlled about everything.
But every once in a while, you will come across ‘the chatterbox’. The chatter box will talk at length about everything, especially in the beginning of the meeting. They might tell you a long story for about their vacation. “Oh, let me tell you about Alaska…” for 20 min. It comes across as being super friendly, but they are also trying to run the clock so you never get into the tough questions. It’s hard to know if someone is using this strategy, but just be on the lookout for it. If they are doing the chatterbox strategy, move into the hard questions more quickly.
Be Curious (min 5-30): Junior analysts will go right into boring questions about WACC, return on capital, the tax rate, etc. I hate sharing meetings with these types. No. This meeting is a great opportunity, don’t waste it on boring questions, unless the tax rate really is a key issue (which it almost never is). You have the management at your disposal and they have to talk to you for an hour. These still semi-friendly 5-25 min at the beginning are a chance to learn something about the company. Ask how a business line works, or how they got into that business in the first place, etc. What’s the backstory/history behind something? Be curious about something and go down a rabbit hole you could never do on an earnings call. Get them to tell a story. This can be the best part of the meeting.
Hard Question Time (min 30) This is where you are going to ask something uncomfortable, or ask your Top 3. Rookies wait too long to do this. They will either be too nervous to ask the question, or try to jam it into the last 10 minutes of the meeting when it’s easy for the CEO to stall/chatterbox out of saying anything useful. No. You want to start this process early. With 30 minutes still to go the CEO knows there is not an easy way out of this. Typically, the CEO will respond with the standard tatemae IR answer they have planned. Now push back and hear what they say. Having 30 minutes gives you time to work the questions and issues back and forth and find the loose threads. If they keep playing games for 30 min that tells you something too. Be polite, but it’s OK if these 30 min are uncomfortable. The job is not to make the CEO your best friend. They have their job and you have yours. Your job is to figure out if owning these shares will make you money. Think about your client, your investor, not the broker or the CEO. Rookies are way too worried about everyone liking them in these meetings. One other note, if you are at their offices usually the atmosphere will be more open and it won’t feel confrontational.
End on a high note: Even if the last 30 min of the meeting hasn’t been positive find something you like about the company and bring it up at the end. “Well thank you for the meeting and the new XYZ product line great. It will be exciting to see it take off! Thank you again for the meeting.”
Bonus Hack: You get what you give: You are not the gestapo. Do not think you are going to go into these meetings with a top CEO and just go through your list of questions and they will talk/answer and give you lots of useful information. If you act like a robot, you will get robot answers. No. Be open and share something about your views, how you see the sector, how your view is differentiated, how you think the sell side is getting something wrong, etc. Have an exchange of ideas and bring something to the table. Give the company information too. I see too many analysts act like they are at a poker game and have to make sure the information is only flowing one way. That’s a turn off. If you open up a little they will too. It’s like all things in life. You get what you give.
Presenting to typers! Major bugbear!!