Sell-Side Insights and Wisdom

Recently, our firm sat down with the director of research of a boutique investment bank that provides high-quality research primarily on small-cap stocks. Throughout the course of our conversation, Mr. X (name redacted to protect the innocent!) provided several words of wisdom for investor relations professionals and public companies, so I thought I’d share them here. My thoughts are noted in italics.

  • Don’t add an analyst/portfolio manager/investment professional to your email distribution list unless said analyst/portfolio manager/investment professional has asked to be added. Nobody likes spam.
  • Respond to inbound inquiries in a timely manner. This may seem like “no duh” advice, but you’d be surprised at how many people don’t follow it. The rule of thumb seems to be 24 hours, but I try to respond before the end of the same business day.
  • Keep analysts updated with information that management has shared during investor conferences and non-deal roadshows, even if your team travels with an analyst from another firm. It goes without saying (although I’m going to say it anyway) that you should never keep analysts, or anyone else for that matter, updated on previously undisclosed material information.
  • Guidance is helpful in that it provides a framework for reported results. Anything is fine, including expected ranges in dollars, anticipated growth rates and ongoing trends. We didn’t discuss annual versus quarterly guidance, but a bit of research will show that there is little consensus (pun intended) on guidance practices.
  • Many investment professionals have compliance restrictions on how they interact with social media. While this may be true at the office, investment professionals are people too, and can access social media to their heart’s content at home. So don’t stop using social media as a vehicle for dissemination, but understand that you likely need to keep using more traditional channels as well.
  • Don’t respond via press release to Seeking Alpha articles. We all know that content on Seeking Alpha has the power to move a stock in either direction, but Mr. X believes responding publicly via press release looks defensive. Each situation is different, but in general, I tend to agree.

— Laurie Berman,

Wall Street is Still Listening

It was not exactly the most fun time to be on an informational road show with a small cap company. But it was well worthwhile.
Yes, the moods were glum. One portfolio manager talked about bread lines in our future. Another said he hasn’t seen anything like this in 35 years. But most were doing their jobs as usual, visiting with management teams, writing research notes and hoping for better times. They all thanked us for coming, and therein is the real benefit of getting out there during these frightening times.
While no company has been immune to the market sell-off, regardless of earnings performance, portfolio managers have choices of which stocks to sell, which to hold, and even whether to step up to the plate and do some buying.  Likewise, sell-side analysts are still making all kinds of recommendations.
What I learned this week may seem like common sense, but here goes:

  1. Stay visible. The company that hides during these times may well be the first forgotten about by investors and analysts.  And may well be among the first to be sold. Staying visible provides tangible benefits.
  2. Re-visit messaging. Cash, cash, cash are three critical words to emphasize if a company has any. Investors are looking hard at balance sheets. Conservative management styles are in vogue, even for classic growth companies.
  3. Concentrate on quality. Yes, investors and analysts are looking for solid stocks to buy—if not today, they want to be ready when that right time comes.  But carefully assess the potential holders with whom you visit. Better to do four or five meetings with quality investors in a day, than squeeze in six or seven and risk a potential short seller or short term, fast-money investor.

In four days of meetings, both group sessions and one-on-ones, it was strange to see that all the guys wore ties.  I just took mine off.  TGIF never sounded so good.


Roger Pondel, President,