HOW TO SUCCEED IN IR WITHOUT REALLY TRYING GAVIN GRAHAM, CIO, GGOF IABC TORONTO CHAPTER 25 APRIL...
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Transcript of HOW TO SUCCEED IN IR WITHOUT REALLY TRYING GAVIN GRAHAM, CIO, GGOF IABC TORONTO CHAPTER 25 APRIL...
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HOW TO SUCCEED IN IR WITHOUT REALLY TRYING
GAVIN GRAHAM, CIO, GGOF
IABC TORONTO CHAPTER
25 APRIL 2006
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A Peek Into What Financial Professionals Need from IR
• Cliches work because they’re true
• “Tell what you’re going to tell them, tell them and tell them what you’ve told them” Anon. IR person (50 AD)
• Less Is More, Keep It Simple, Stupid and Hit ‘Em With Your Best Shot
• Become a trusted source, which means don’t lie by omission or evasion
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Good IR vs. Bad IR
• Tells them something new
• Tells it briefly• Doesn’t abuse its
access• Keeps its contacts to
an appropriate (not too frequent) level
• Doesn’t tell them anything new
• Is longwinded and verbose
• Abuses its access, primarily by excessive material
• Doesn’t tell the truth, either by design or accident
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The Most Precious Resource for Managers and Analysts is TIME
• It’s A Wired World…Globalization…The World Is Flat…Information Overload…
• The sheer volume of information has reduced financial professionals’ ability to extract value due to time pressures
• Telling a clear story concisely will distinguish you from the crowd…IF you can gain access
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Keep It Simple, Stupid
• KISS applies to both the message and the medium (thanks Marshall!)
• Using a less is more format, only highlight the 1, or at most 2 points you need to make. If your client can’t do that, lose them
• Using electronic delivery, especially Pdf, will win you many friends
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Less Is More
• From the usual quarterly earnings numbers, there will be 1, or at most 2 points of importance for investors
• Other points can be used to support the story that is being told by the principal points
• DO include the GAAP earnings numbers in the first paragraph-some investors get grumpy if they have to go to Page 8 to find them
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Hit ‘Em With Your Best Shot
• The average company will have 5 or 6 occasions to get investors’ attention a year-don’t waste them
• The 4 quarterly announcements, the AGM and a takeover/plant opening/major (at least 5% of revenue) contract are your chance
• Make sure that everyone who is listed is aware of the story-and make sure their phone no. is correct
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How Not To Do It
• A major Canadian company that was presenting at an industry conference to brokers, refused to let large investors attend sessions
• When the investors did attend, using the brokers credentials, there was nothing new in the presentation
• The IR department refused to change their stance when asked personally by the investors
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Fool me Once, Shame on You, Fool Me Twice, Shame on Me
• Financial professionals have very little tolerance for unpleasant surprises, especially in the post Enron/Worldcom world
• You may be forgiven for a genuine mistake, but woe-betide you if you do it again for any reason
• If you don’t believe what your client says, walk away
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How To Become a Trusted Source
• Tell them a good story that’s correct
• Tell them something they didn’t know before, and will help them make money
• Tell them when you don’t know or can’t say, and get back to them if you find out the answer
• Be available when they need to call you, or have someone equally knowledgeable
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CEO, CFO, It’s What You Know
• While providing access to the CEO or CFO is useful as an incentive, if they won’t or can’t say anything new, don’t bother
• If you have a user-unfriendly management team, restrict access. Sadly, presentation ability does matter
• A good internal IR team is worth its weight in gold, but too often they are the exact opposite and should be kept out of the loop for your contacts
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The Media-Care and Feeding Of
• Journalists need stories, just like financial professionals, but they need them by 3 p.m. today, and I mean today
• Being available is half the battle; it’s amazing the number of interviews you do on bank holiday Friday afternoons
• Same rules as fund managers and analysts, with the proviso that the journalist may have an agenda, of which you need to be aware
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The Zulu Rule
• Put forward by a former British entrepreneur, the Zulu Rule states that if you do a little study of Zulus, you will know more than 97% of the population about them-you’re an expert
• If you do a little study about your clients’ industries, and it doesn’t have to be a lot, you will still be better informed than many of the managers and journalists you are in contact with-you’re an expert (use carefully around genuine experts; admitting ignorance is good)
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What’s Under the Hood?
• Which are the 1 or 2 points you should focus on to tell your story?
• If you don’t know, go and find out; they should be obvious
• Growth is good, as long as you make money doing so
• Value is good, as long as there is some catalyst to make investors recognize it
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GGOF’s Top 10 Ratios- In Reverse Order
• 10 Earnings Per Share are the least important, as they are the most subject to manipulation
• 9 Takeovers are okay, but most don’t make money for the acquiring company
• 8 Management salaries are good stories, but sometimes they even earn them
• 7 Corporate governance is boring but lack of it will kill you quickly
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GGOF’s Top 10 Ratios-Part 2
• 6 Price to Book or Price to Sales can’t be easily manipulated and can tell you a stock is cheap
• 5 Cash-flow is much more important than earnings, and you can’t fake it for long
• 4 Income trusts are not a Ponzi scheme or bubble, but watch how much of their cash-flow they’re paying out-anything over 95% is not sustainable and they’ll have to cut it
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GGOF’s Top 10 Ratios
• 3 Value tends to beat growth over long periods of time, although in the long run, we are all dead, as Keynes remarked
• 2 Watch what they do, not what they say; if management owns sizeable amounts of shares or is buying shares, generally it will work out okay
• 1 Dividends are the single best guide to long term performance and, being regular cash payments, can’t be faked for long
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What Do You Want To Do When You Grow Up?
• Being in IR is a gateway into the financial professions or journalism
• If you do a good job, you may end up being hired by the people you talk to, so remember when you speak to them that you’re conducting a very lengthy job interview
• Tell the truth as you know it, and you won’t go far wrong