Keynote: Identifying Your Stock’s Critical Factors
By Steven Rubis
Speaker: James J. Valentine, CFA, DBA, managing partner of Analyst Solutions
KEY TAKEAWAYS
- For an investor relations officer (IRO), sell-side equity analysts represent the company’s sales force to investors. However, IROs cannot directly control sell-side analysts, their research or their opinions – unlike a traditional sales force. Therefore, IROs often are left wondering how they can better interact with the sell-side to obtain outcomes more closely aligned with management’s desired outcomes. Jim Valentine, author of Best Practices for Equity Research Analysts, provided his views of how IROs can optimize their sell-side analyst relationships.
- Many IROs may be uncertain what an analyst wants or needs at any given time. Understanding the analyst framework is important, starting with the sell-side’s driving goal: to generate informed insights for investors, including accurate financial forecasts that drive differentiated stock calls. Helping analysts develop a differentiated thesis and informed opinion on the IRO’s stock will significantly help drive valuation and ownership among the buy-side over time. Simply put, the best-in-class sell-side analyst will relentlessly work to fill in the information asymmetry gap for investors.
- IROs should focus their time and attention on mentoring their covering analysts. The more useful insights you can provide to help an analyst develop a differentiated thesis, acting as an officer of the firm, the more likely that analyst will have a positive impact on the company’s investment thesis and share price. Know the key drivers of your stock and provide insights about your company, which also can win the hearts and minds of analysts that may be negative or less engaged.
- Some IROs may be concerned that they and management don’t have enough time to provide this level of mentoring due to “too many analysts” covering their stock. In these situations, the IRO should focus on the most enterprising analysts. The buy-side will have opinions about this. A large number of buy-side portfolio managers are underwhelmed by the majority of sell-side research. Most research is homogonous, is backward looking, and lacks important insights, substance and conviction.
- Identifying your company’s key analysts may be easy. If not, consider using artificial intelligence (AI) to identify them. For example, prompt AI for the largest conference in your industry, and then prompt AI for the 10 most quoted experts at the last conference.
- For additional information, see the presentation.
Presentation: Understanding Your Stock Price