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Sweet Talkers and Bad Investments: A Cautionary Tale of Company Meetings

Attending Company Meetings
Written by Andy

In this feature we discuss the experiences and opinions of investors who have attended meetings, webinars, or presentations with company management.

What do other readers here think on this point of meetings with management – good, or bad?

I think that’s a good topic for us all to ponder. One of my most experienced and successful investor friends got caught out on several wipe-outs, having been reassured by management. So, he now doesn’t speak to any management teams.

One shares trader ‘Monty Carlo’ had this to say:

‘I think the question is whether you can extract information from meetings with management without being too influenced by either management enthusiasm or misdirection. Experience says I’m in the “influenced” crowd, so I am now more wary.

Influenced or Informed? Finding Balance in Interacting with Management

I’ve certainly attended numerous meetings with management where, with hindsight, I would have been better off staying away.

The problem is that it is very difficult to put together a detailed financial model for a company without talking to them. Stuff like capex plans, new capacity coming on stream, explanations for inventory fluctuations, forward tax rates etc. are all very difficult to access otherwise. If you are a pro then you can replace some of this by talking to a sell-side analyst.

If you know enough about the sector to cross-reference the story from multiple companies & challenge the spin then meetings are worthwhile, but if you are a generalist investor relying mostly on the company to explain why their product is market-leading then you are probably going to get eaten alive.

It also depends on who sets the agenda – if you have a long list of detailed questions prepared after examining the accounts then meetings can be great. If you are time-poor and let the management perform their slide-deck then you are at risk.

If you look at companies like Autonomy and Wirecard then it is obvious there are far too many generalist fund managers letting company guidance replace proper research.

I have found that if you correspond with management/IR via email then that tends to level the playing field a little as they know false statements put in writing can come back to haunt them. It isn’t always practical though.

Gut instinct that something was not right kept me away from Autonomy, but I do recall a sense of outrage looking through my notes of meetings with Marconi. If you play the game long enough you will eventually get tripped up somewhere.’

Another experienced shares investor, Robbie Burns had this to say about attending company meeting and listening to management presentations:

‘I realised many years ago after some bad experiences never go to meetings or watch any management present.

I spent a year (a long time ago) going to hotel meetings etc and in each case lost money being influenced by sweet talking guys (nearly always guys).

Indeed one company – Vanco – proudly showed me round their offices showing me what they did they were SO bullish. I thought “wow these guys are great”! I bought shares and they went bust only six months later.  (Lucky my shares hit a stop loss before that happened).

I feel you just can’t help being influenced and you will only be fed with positives. Also, you wonder why they go out and present. If the company is going well, the shares will go up via statements and my feeling is it tends to be the more desperate ones that you see presenting or indeed paying to be interviewed.  There is an argument for shorting shares in any company that is always presenting or always paying up to be interviewed. Remember they also have to pay to present at most events.

I was besieged on email recently by a company CEO telling me how great his company was and could I cover them,  come and meet them and I thought “desperate I must short them”!

They are down 50pc since! (They were too illiquid to get a short never mind).

Overall I’d suggest to ignore them all, use the amazing stocko screens go on cold hard figures and the likely future outlook.  You then have no confirmation bias from sweet talkers.

I had a friend (the only friend I have had that bought shares!) who sadly died a while back but she would go to meetings, ignore what they said and looked at the CEO’s shoes. If they were great shoes, and polished and looked after she would buy the shares! Well, this worked for her.  In my case if the CEO is bald (check on their website) that’s always positive as guys with hair spend an hour a day faffing about with it, which is 365 less hours a year spent on the company’s welfare.  If in doubt – buy bald, short hair.’

Personally, I never want to talk to management, it just makes it harder to sell. I may be cynical but if I treat them all as potential con artists then I can never be disappointed, only surprised to the upside. I’ll watch the occasional web presentation but that’s as far as it goes (though mostly just for the Q+A). I’d much rather stick to RNS and broker numbers.

I used to do lots and lots of research but I’ve trimmed this back to the minimum required as I found I’m less likely to sell having spent days looking into a company. Always want to be mentally prepared to ditch any holding, almost robotically, if red flags show up. Everyone goes about things differently though, which makes investing so fascinating. – Wolf of Small Street

I do sometimes listen to webinars with management but do manage nowadays not to rush in and buy when impressed, or indeed sell when less so!!  After the webinar, I spend some time researching the company, using Stockopedia and other sources , and only make a decision when the research process is completed.  It’s so easy to be sucked into taking action that I have often regretted.

Sadly my experience with Mello (virtual and physical), has been more or less the same. Good presentation and you come back with the idea that you have heard or seen something that others have not and you have the edge!   To be fair, Mello has a debating session too which I like because you see both sides of the argument there. I don’t know anyone has done a retrospective research on the companies who have presented at these meetings versus a sample of similar companies who have not.

Nowadays, if a company is not on my shortlist, I do not attend their presentation, discussion or anything related to the company. I do not want to be persuaded or convinced however good the story is.

Interesting on body language – a couple of years ago I made a point of watching fraudsters making presentations etc on YouTube – to see if I could identify any tells. I couldn’t.  I also make a point of not attending AGMs,  to avoid being unduly swayed by insider enthusiasm.

Here are some key points from the discussion:

  1. Negative Experiences: Some participants shared negative experiences of attending meetings or presentations and feeling influenced by the management’s persuasive communication. They mentioned instances where they lost money after being influenced by overly positive presentations or sweet-talking executives.
  2. Confirmation Bias: There is a concern that attending such events can lead to confirmation bias, where investors are exposed to only positive information and may overlook potential risks or downsides.
  3. Skepticism: Several investors expressed a skeptical approach to management presentations, stating that they prefer to rely on cold hard figures, research, and objective analysis rather than being swayed by persuasive speeches.
  4. Body Language: One investor mentioned using body language cues as part of their evaluation process. They observed that negative body language during a meeting with a company’s CEO could be an indicator of potential issues with the company.
  5. Avoiding AGMs: Some participants mentioned avoiding AGMs to prevent being swayed by insider enthusiasm.
  6. Importance of Research: Many investors emphasized the significance of conducting thorough research on a company beyond just attending meetings. They highlighted the importance of using tools like Stockopedia and other sources to make informed decisions.
  7. Extracting Information: There was a discussion about the challenges of extracting useful information from meetings with management. While some investors found value in talking to company representatives for detailed insights, others felt that management presentations can be orchestrated to present a positive image.
  8. Gut Instinct: Some investors mentioned relying on their gut instincts or intuition to identify potential red flags or issues with a company.
  9. Personal Investing Styles: It was acknowledged that different investors have varying approaches and preferences when it comes to interacting with company management and conducting research.

Observation based on over a decade of shorting stocks: When a company puts out a PR of major news (like a new CFO, or a new strategic partner) the day before reporting earnings, said earnings are more likely to miss consensus expectations.

On balance I think listening to the webinars and attending meetings does give some more information. There is a lot you can read between the lines in the way information is conveyed, verbally or non-verbally. However, one has to be wary that all of these are highly organised, highly planned information sharing sessions. Orchestrated by Investor Relations or PR teams, internally or externally. Naturally, the story that comes across is a very compelling buy case. And people who make it to the c-suite often have very good communication skills… politician-like skills.

Another important point is I think to have a cooling-off period after meetings, or watching webinars. I often have an urge to buy shares after meetings, but stop myself because it needs a few days to cool down and remember all the negative points!

To conclude it is important to balance skepticism and thorough research with any information obtained from meetings, webinars, or presentations with company management. Investors are encouraged to stay objective and avoid making hasty decisions based solely on persuasive presentations.

About the author

Andy

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