Knowing Mr. Market

Mr. Grump.jpg

Mr. Market can be a fickle creature.  And it’s often during these times that a company’s phone and email might become flooded with “comments” from individual investors seeking solace from market trepidation.  Questions range from the typical stock price related question to business fundamentals, while other “questions” can border on the absurd.  Given the current environment, I thought I would share some tactics on improving retail shareholder relations.

1. Know the Audience by Building a Database

In investor relations, sometimes it is difficult to know retail shareholders. I have found that one of the easiest ways to get to know them is by attaching a link on a company press release to an online sign-up form (double opt-in) that automatically stores their information in a database or company website.  I then focus on building this opt-in list through a variety of additional methods so that I can engage it for on-going communications.

2. Communicate Frequently (Listen & Respond)

Sending an email following a conference call or investor conference presentation and thanking people for participating can enhance loyalty.  Investing is often a solitary experience, and returning calls promptly will help distinguish a company’s IR program from others.

3. Provide Easy-to-Digest Information

When I receive calls from individual investors, I’m sometimes surprised by their lack of knowledge of the company they put their hard earned money into.  Maybe they just got a tip from somewhere or someone, but I have found that many investors have not even listened to a readily available webcast or read a quarterly or annual report.  To solve this problem, we have found that it’s quite helpful to ultilize the power of video to provide a company overview.

4. Solicit Feedback

Encouraging investors (who otherwise might not be as vocal) to share their thoughts through an online survey can be an effective way to understand how a majority of retail investors think and feel about a company and its management team.

While there are a host of additional methods a company can employ to improve its relationship with retail investors, the ultimate goal is understanding how to communicate effectively with shareholders.  After all, the more Mr. Market knows, perhaps the less fickle he will be.  Please feel free to contact me at for more information about communicating with retail investors.


— Matt Sheldon,

Bubble Effects

Reflective Bubble

Photo Credit: Flickr, zzub nik

Why does it seem the economy continues to putter along? Good economic news continues to get kicked in the shins the next day by bad economic news and the cycle continues day after day, week after week and month after month.
Every expert has a theory on why the recovery is proceeding at a slower pace than the effects of arthritis in both knees. Here’s one simple theory: No one has any money. At least no one in the middle class has money.
Marketwatch’s Rex Nutting wrote recently that it’s no great mystery. The housing bubble crushed the middle class. The cost of plummeting housing prices has been calculated at a staggering $7.38 trillion of lost wealth, sucking American homeowners’ equity into a financial black hole and reversing the trend of economic progress for the middle class.
Nutting’s theory is that when the bubble burst, the middle class could no longer take money from their homes to buy cars, boats, TVs and other gizmos. Now they are putting their money “into their homes, not taking it out,” and it will take a long time for the middle class to get back on track and in a financial comfort zone.


Ron Neal,

Curbing Enthusiasm on Short Sales

On Wednesday, February 24, 2010, the SEC narrowly approved curbs on short selling, addressing what some consider to be one of the major contributing factors of the 2008 financial crisis.  The new rule is a modification of the “Uptick Rule,” which was designed to be a preventative measure against downward spiraling stock valuations in turbulent markets.  However, the rule was eliminated in 2007 because of its lack of efficacy.
The new rule will operate much like a circuit breaker, taking effect once the price of a stock has declined by 10 percent in a given day. Once triggered, short sales will no longer be permitted at or below the National Best Bid or Offer for the remainder of the day and the following trading day.
The modified uptick rule will take effect in approximately 60 days, but stock exchanges have up to six months after that time period to implement the new rule.
Highly debated since the 2008 financial crisis, short sales have been one of the most controversial issues facing the SEC.  Opponents of such regulation have pointed out that financial stock valuations tumbled even after regulators imposed a short-term ban on short selling late in 2008.  Others have voiced strong disappointment that the modified uptick rule did not go far enough to protect investors.  One thing is for sure – this is not the last we’ll hear on short sales.



New SEC Scrutiny

  1. The SEC is now requiring, not merely suggesting, that companies disclose whether the roles of chairman and CEO are held by one person, and if so, why the company wants to keep it that way and the reasons it believes such an arrangement is appropriate. There also must be a separate “lead” director.

  2. In addition to business experience of directors, disclosure henceforth must be made as to specific experience, qualifications and attributes that led the nominating committee to the conclusion that the person should serve as a director in the first place. Likewise, if a director is chosen to sit on a particular board committee, the reasons why should be disclosed.

  3. Stockholder meeting voting results this year must be reported via an 8K within four days of the meeting. The old requirements, no longer in force, called for reporting results in Forms 10-K and 10-Qs.

As with all SEC mandates, legal counsel should always prevail.


Roger Pondel, President,

Reading Between the Lines

When I was a kid, one of my father’s many recurring jokes was: “If it’s raining and you want to stay dry, just walk between the drops.”  Sorry Dad, it wasn’t that funny, and, of course, it wasn’t even possible.
It is possible, however, at least interpretively, to read between the lines of some of the negative economic news these days and find something favorable.
For example, take comments published in the Wall Street Journal from London Business School finance professor Elroy Dimson on long-term investment returns:

  • “Stocks may face a long road back.”

  • “There’s no guarantee of a quick rebound.”

  • “We’ll have to wait nine more years before the Dow Jones average has a 50% chance of hitting its 2007 highs.”

  • “It may be a long time before investors are again willing to value stocks at much higher than the long-term average of 15 times earnings.”

U N C L E!  Enough already!  OK, so here’s the silver lining between the professorial comments: 

First, if, as the good professor professes, the Dow Jones average will double in nine years, that will signify a total return of 7.5% per year. Try to get even close to that by stashing your money in a bank account.

Second, for more than 100 years through 2008, U.S. stocks have averaged an annual 6% return after inflation. Not bad either.

And third, there are many stocks of solid companies these days that are trading well under 15 times earnings, leaving plenty of room for appreciation.

So be careful, but jump in already. The water’s not that bad.  Just don’t try walking in between the raindrops.


Roger Pondel,

The Audacity of Junkets

Just months after floundering financial institutions secured billions of dollars in bailout money from American taxpayers, they are getting plenty of heat for their dumbfounding misuse of the money.
The most recent case involves Wells Fargo & Co., which canceled a pricey Vegas trip after their itinerary was leaked to the media and created a storm of criticism. Wells Fargo, which collected $25 billion in bailout money, had booked 12 nights at the Wynn Las Vegas and sister hotel, the Encore. Not exactly planning to slum it, were they?
This is just the latest transgression. Wall Street securities firms should send a thank you note to Wells Fargo for replacing them in the Audacity Hall of Fame and knocking them off the front pages. Wall Street was blasted by President Obama and pretty much everyone else with a conscience for its irresponsible behavior after reports of $18.4 billion in bonuses being paid out in 2008 as the industry collapsed, costing taxpayers billions of dollars and tens of thousands of job cuts.
The Wells Fargo incident also comes on the heels of an ABC report that accused Bank of America of allegedly spending $10 million on a week-long Super Bowl party and Morgan Stanley planning an “elegant gathering” at a five-star resort in Florida.
Instead of spending taxpayer bailout money on lavish Vegas junkets, bonuses in the billions and executive spa treatments, maybe these financial institutions should be using the cash to buy a clue. Or, at least, spend it on a good crisis communications firm like PondelWilkinson.


— Ron Neal,

Yes, Virginia, There is a Santa Claus

All is not doom and gloom for this coming holiday season.  While pundits and prognosticators are predicting less than robust (to put it mildly) retail sales through the rest of the year, one industry, at least, anticipates great holiday sales.
Let’s here it for this country’s gamers, who are expected to help the sales of video games remain strong this year and in 2009.  A recent Yahoo! Tech article points out that industry executives said their optimism is fueled by “solid sales of advanced game consoles made by Nintendo, Sony and Microsoft.”  While this projection, which was made at the BMO Capital Markets interactive entertainment conference in New York, seems to defy common sentiment, we could all use a bit of good news today.
So, the next time you run into a video game freak or perhaps just an average 10 year old boy, thank them for shining a bit of a bright spot on the economy.
Let’s hope those industry executives are right.


— Laurie Berman, Senior Vice President,

Putting Stock in an Elephant or Donkey

Following last week’s historic election, many investors are probably wondering if their obliterated 401(k)s will take a turn for the better under Barack Obama. Is your stock portfolio really better off with a Republican or Democrat in the White House? Well, frankly, trying to determine the differences between the parties using stock market data is folly…but let’s do it anyway.
According to a recent New York Times graphic, if you had to invest exclusively under either Democratic or Republican administrations, here’s what the results would have been.  For the sake of fairness, Herbert Hoover’s presidency under The Great Depression has been excluded.
In nearly four decades, a $10,000 investment in the S&P stock market index would have grown to $51,211 under Republicans. Invested under Democratic presidents only, $10,000 would have grown to $300,671 at a compound rate of 8.9 percent during the same time period.
Four Republicans with solid gains include George H.W. Bush, who wins out with the best average annualized return – excluding dividends – of 11%, followed by Dwight D. Eisenhower (10.9%), Gerald Ford (10.8%) and Ronald Reagan (10.2%). The Republican bell curve was weighed down by the Richard Nixon years (-3.9%) and, of course, President George W. Bush, whose number stood at -5.1% as of mid-October. Barring huge gains over the next few weeks, Bush’s number will be the worst since Hoover, a whopping -30.8%.
Bill Clinton’s term was the only double-digit gain among the Democrats, finishing with an average annualized return of 15.5%. The rest of the Democrats – Franklin D. Roosevelt, Harry Truman, John F. Kennedy, Lyndon B. Johnson and Jimmy Carter – ranged from 6.5% to 8.2%.
Whether you’re running with the Elephants or the Donkeys, I’m certain both parties would agree that a bull run would be nice during the next presidency.


Ron Neal, Senior Associate,

Russell’s Annual Index Reconstitution

On June 27, after the market close, Russell Investments will rebalance its entire family of indexes, including its 25 U.S. indexes.
Russell undertakes this Herculean task every year to “maintain true representation of global equity markets and avoid capitalization and style slippage.”
There are a few important dates to watch for:

  • Friday, June 13 – Announcement of preliminary additions and deletions to the Russell Global Index and the Russell 3000®.
  • Friday, June 20 and Friday, June 27 – Updates made to the list of preliminary additions and deletions.
  • Friday, June 27 after market close – Indexes are reconstituted.
  • Monday, June 30 – Final index membership lists posted.

Index memberships and rankings are determined using a company’s total market capitalization.  Although we won’t know the size of the largest and smallest companies in each newly reconstituted Russell index until June 30, here’s a look at some statistics for the current indexes

  • Largest company in the Russell 3000® Index: $468.5 billion market cap.
  • Smallest company in the Russell 3000® Index: $261.8 million market cap.
  • Largest company in the Russell 2000 Index: $2.5 billion market cap.
  • Smallest company in the Russell 2000 Index: $261.8 million market cap.

What does this reconstitution mean for public companies?  According to Nasdaq, the day Russell’s indexes are reconstituted is generally one of the heaviest trading days in the U.S. equity markets, as index and other asset managers reconfigure their portfolios to reflect the new composition of Russell’s indexes.  If your company is included in any of Russell’s indexes, be prepared for heavier than usual volumes at the end of this month.


Laurie Berman, Senior Vice President,

In and Out

Effective with the start of trading on February 19, the Dow Jones Industrial Average will add Bank of America Corp. and Chevron Corp. and drop Altria Group Inc. and Honeywell International Inc.  Reuters said that this is the first change in the 111-year old Index since April 2004.
The composition of the index is determined by editors of the Wall Street Journal and while there are no set criteria for a stock to be added or deleted, the editors of the Journal intend that all of the components of the index be highly established U.S. companies that are leaders in their respective industries.


Laurie Berman, Senior Vice President,