Our Blog: The Podium

How Investor Relations Can Support the Buy Side’s Investment Process

By Dennis Walsh, Vice President

“Buy-side analysts truly value a company with a responsive investor relations program led by an informed IRO,” shares John Barr, Co-Manager of the Needham Growth Fund (NEEGX) and Manager of the Needham Aggressive Growth Fund (NEAGX).

Most strategic investor relations programs aim to increase institutional ownership with new long-term shareholders. But anyone who has ever worked in IR knows this is often easier said than done. Targeting quality potential investors and conducting outreach can be a major undertaking. Understanding the buy-side’s investment process for identifying long-term holdings is essential to your success. So what are the key elements of a typical buy-side’s stock picking process? At Needham, Barr’s research team sources ideas from a number of methods, including quantitative screens based on various financial metrics, reading trade publications, and talking to people such as buy-side colleagues. Barr says, “If your stock happens to be on our idea list and you call looking for a meeting then we’ll do it. If it’s not on our list, it’s unlikely that we will take a meeting.”

How can IR contribute? Needham analysts like to conduct their own research – it gives them an opportunity to develop their own point of view – so being undercovered by the sell-side is not always a negative. If your company is being considered as a new investment idea for a firm like Needham, a best-in-class IR program can support the due diligence process from start to finish. Consider these insider tips from Barr to help IROs better support the buy-side’s investment process.

  1. Ensure that your IR website is informative and easy to navigate.

One of the first steps in Barr’s due diligence process is visiting the company’s IR website. It’s therefore critical to convey the key messages and growth strategy consistently throughout the IR section. The latest trends in website technology aren’t appealing to Barr. He’s looking for the essentials, such as investor presentation, recent conference call transcripts, investor day slides and SEC filings. These should all be easy to find without having to dive too deep into the site. Barr also finds value in reading customer testimonials and even management and board bios. For example, the absence of an executive’s educational background could imply the person never graduated from college.

  1. Management’s remarks on the earnings call should be brief and to the point.

Barr doesn’t have time to listen to all of the live conference calls for the companies he covers, so he typically reads the transcripts. The key points can be extracted from a transcript in 10 to 15 minutes versus listening to an hour long call. “Careful consideration of what management says during their prepared remarks is important. Often the CEO and the CFO say the same thing, and that’s a waste of time. Brief remarks that really address the highlights/issues of the quarter are best,” said Barr. Don’t get many questions on your call? That’s okay. Barr says “we prefer crickets over the hallelujah chorus of analysts’ proclaiming ‘great quarter guys!’”

  1. The IRO should play a key role in the process by being well-prepared to answer questions.

After a few days of basic research, Barr will reach out to schedule an introductory call. This call does not need to be handled by the CEO or CFO. In Barr’s opinion, IROs can add value here if they can answer the analyst’s initial questions and clearly articulate the company’s story. “An IRO should have a thorough understanding of the investor presentation and SEC filings. We are looking for a statement of the company strategy, its growth initiatives, track record of success, and key markets and products. At this stage, we are really looking for an expanded elevator pitch,” said Barr.

  1. Provide access to management when necessary.

The next step is the most critical part of the process: meeting the CEO and CFO in person. Analysts become frustrated when scheduling becomes an obstacle. When you aren’t available to meet with them at a suggested time due to a quiet period or other scheduling issue, offer an alternative. Barr advises that if a fund has requested several meeting times that did not work with management’s schedule, reach out to them when you are visiting their home city. If you haven’t heard from an analyst/PM that once expressed interest, Barr suggests calling them once a quarter to give an update. They will appreciate your proactive effort, or they’ll let you know if they are no longer interested.

As a last step, Barr develops a summary report to make the case for investing in a company based on his research. He typically provides four to five key reasons for the investment. The more supportive the IR team was during the research process, the easier his case will be for making the investment.

No matter how the tools for communication change over the years, the staples of an effective investor relations program remain constant: Be transparent. Be accessible. Be consistent.

John Barr is a Co-Manager of the Needham Growth Fund (NEEGX). He also manages the Needham Aggressive Growth Fund (NEAGX). He engages in a variety of portfolio management-related activities, including stock selection, research, company visits and market analysis. He rejoined Needham & Company in August 2009 from Oliver Investment Management, LLC. From 2002 to 2008, he served as a portfolio manager and analyst at Buckingham Capital Management for its diversified industry long/short domestic equity hedge fund. From 2000 to 2002, John was a managing director and senior analyst at Robertson Stephens following semiconductor technology companies. From 1995 to 2000, he was a managing director and senior analyst at Needham & Company. John was an Institutional Investor All-Star and was ranked by Reuters as leader of one of the top software teams. He is a graduate of Harvard Business School and Colgate University.

Dennis Walsh is Vice President at Sharon Merrill. He counsels clients on a broad array of investor relations and corporate communications issues such as market research, competitive intelligence, earnings announcements, investor targeting, roadshow planning and social media. Dennis oversees Sharon Merrill’s Socialize IR consulting service, which is designed for public companies that recognize the benefits of incorporating social media into their shareholder engagement program.

Subscribe to our weekly email: Investor Relations Around the Web

IR Program Planning, Corporate Access, Targeting, Investor Meetings, Non-deal Roadshow, Buy-Side, Needham, Roadshow Planning, Investor Relations

Subscribe to The Podium!

Connect with your Investors

Establish a sincere connection with investors to communicate key messages during your Investor Day. Download our free e-book on effective presentation habits, and learn to deliver ideas with confidence and clarity.

Delivering Effective Presentations

When it's time for a change

Whether planned or sudden, it is crucial to communicate the succession of high-profile positions effectively. Download our three-part e-book and learn the best way to craft a plan for CEO, CFO and Board of Directors transitions.

Download Your Free eBook: Communicating Management Transitions 

Be Proactive, Not Reactive

With our new Proxy GamePlan, we create a year-round, data-driven strategic roadmap for effective shareholder engagement. Implement a best-in-class program rooted in a deep understanding of your company’s proxy practices, shareholder voting trends and peer landscape.

Learn More About Proxy GamePlan

Find Effective IR Counsel

Whether you’re seeking external IR counsel for the first time or evaluating your current provider, you need a firm that understands your strategy, adapts to your culture and tells your story. Download our free guide on how to assess the effectiveness of an investor relations firm.

How to Assess  an IR Firm

Activism Defense

No company is immune to shareholder activism. Sharon Merrill helps boards of directors and executive management teams identify the activist red flags lurking in your shareholder base, assess your governance risks and develop an action plan to prevent, detect and neutralize any threats. Download our free white paper, “Leveraging Institutional Shareholder Relationships to Reduce Activism Risk,” and learn how the best defense against activism is a strong offense.

Download Activist Defense White Paper

Captivate your Audience

Speaking persuasively is critical in today’s competitive business environment. Effective speakers use voice techniques and body language that project authority and credibility. Download our free e-book, “A Guide to Delivering Captivating Presentations,” for insight into good -and bad- presentation habits, and learn how to improve your skills.

Become a Persuasive Speaker 

Perceptions Matter

How do you ensure that investors clearly understand your strategy, growth drivers and market position? The most effective way is through a perception study. By periodically taking the investment community’s pulse you can avoid the knowledge gaps and misperceptions that hurt valuation. Download our free whitepaper, Why Perceptions Matter, to learn more.

Download your free copy of  'Why Perceptions Matter' 

Common Topics:

More topics