# Talking to Management



## Value Hunter (1 December 2013)

I'm just interested to know how many people on this forum talk to management (CEO/MD or CFO or COO) and or directors of companies they invest in? 

These days I usually (not always though) talk to management (or sometimes the chairman) when I invest in micro-cap, small-cap and mid-cap companies. 

Generally (not always though) for small to medium sized companies management are happy to talk to retail investors (for large caps you've got to talk to investor relations). I find it really helps you get a deeper understanding of the business model, the risks, the competitive position, and the growth opportunities. I also think you get a better idea of how particular managers think and operate. Typically you can talk to management via email, by phone, or by attending the AGM (I generally use a mix of all 3) or other company presentations (e.g. a micro-equities micro-cap conference). 

For example I own shares in Credit Corp (CCP) and talk to Thomas Beregi (the CEO) after every results announcement. He's always happy to spend 30-45 minutes answering my questions (Credit Corp keeps costs low by not having an investor relations team). I find Thomas to be very straight forward, honest and knowledgeable. 

I sometimes also talk to the management of competitor companies (Phillip Fisher's on advice on the merits of scuttlebutt is quite sound)

I get the feeling not many people on this forum talk to management. Of course there is always the risk of being sucked in and sold a good story by management (many CEOs are excellent promoters/salesman). I would like to hear from other value investors here.


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## Valued (1 December 2013)

If I may ask, how much do you invest in these companies to have management even take a look at you? Do you open your emails by stating how many shares you own or do you message them essentially anonymously?

To be honest, I feel I don't even have a right to talk to management sometimes when I am only investing a relatively small amount of money. I feel like I would be wasting their time.


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## skc (2 December 2013)

Valued said:


> If I may ask, how much do you invest in these companies to have management even take a look at you? Do you open your emails by stating how many shares you own or do you message them essentially anonymously?
> 
> To be honest, I feel I don't even have a right to talk to management sometimes when I am only investing a relatively small amount of money. I feel like I would be wasting their time.




You have every right to talk to management. You are a shareholder... you (part) own the company and they are at your employ. You are their boss. They should never ask the amount of shares you hold.

I'd be a bit concerned if the CEO is talking to every retail holder for 30-45 minutes after each results... but on an adhoc basis it's probably good PR.

On actual investment related issue - I don't talk to management at all because I don't really want any more information than what is available in the public domain. I think management capabilities should be reflected in the numbers and track records, and not how well they can communicate with me (regardless whether they are being truthful or just talking up a good story).


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## Value Hunter (2 December 2013)

skc said:


> You have every right to talk to management. You are a shareholder... you (part) own the company and they are at your employ. You are their boss. They should never ask the amount of shares you hold.
> 
> I'd be a bit concerned if the CEO is talking to every retail holder for 30-45 minutes after each results... but on an adhoc basis it's probably good PR.
> 
> On actual investment related issue - I don't talk to management at all because I don't really want any more information than what is available in the public domain. I think management capabilities should be reflected in the numbers and track records, and not how well they can communicate with me (regardless whether they are being truthful or just talking up a good story).




Obviously for small cap companies there aren't too many retail shareholders trying to talk to management so I don't think the concern of management wasting too much time is valid, because investors like me are in the minority. Apart from the AGM, I doubt most small cap companies would have even 10 retail investors trying to talk to management after each results announcement. If a company can spend many hours talking to countless analysts I don't see why they can't talk to 4 or 5 retail investors.

As to your other point talking to management is a good way to learn more nitty gritty detail about the business model and the growth strategy.

Valued, management rarely ask how many shares you own. In fact often I speak to management of a company before I buy shares and just tell them I'm interested in investing in the company and ask them is they have time to answer some questions. I then fire away with the questions. 

I find the first time you want to talk to management its best to do it face to face via the AGM or by phone. You can then follow up subsequent questions via email if you wish. This way they tend to be more responsive because they feel they know you a bit (you've built some rapport), as opposed to just using email straight off the bat.


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## Valued (5 December 2013)

You all make good points. I just picture management spending 18 hours a day answering questions from retail investors after every announcement. Of course, I doubt this is the case. Most would not bother asking questions. I should go more out of my way to ask questions.


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## tech/a (5 December 2013)

Worked really well for RED holders
They were on a first name basis.
Read the thread.

My opinion----totally useless.


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## Klogg (5 December 2013)

Value Hunter said:


> I get the feeling not many people on this forum talk to management. Of course there is always the risk of being sucked in and sold a good story by management (many CEOs are excellent promoters/salesman). I would like to hear from other value investors here.




To be honest, I'm not a fan of talking to management - but I'm only a newbie, so don't put too much weight into my opinion.

Philip Fisher is slightly different to other value investors, in that he did not hesitate to pay 20*P/E for a great growth story. But he made sure there was growth.
However, look at someone like Walter Schloss, and he's more interested in straight value (i.e. cheap companies with steady earnings, and of course the "cigar butt" style investing) - and he never really talked to management:
http://basehitinvesting.com/superinvestors/walter-schloss/
http://www.bengrahaminvesting.ca/Resources/Video_Presentations/Guest_Speakers/2008/Schloss_2008.htm

And he's not the only one - there are a number of successful value investors that find little or no value in speaking to management. My take on it is, if there's something specific that I can't find and want to ask management, I'll generally send them an email... but it's rare. Most of the time I find what I need by digging through annual reports, other announcements and google searches. If I'm missing too much info, I'll move onto the next company.


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## McLovin (5 December 2013)

skc said:


> On actual investment related issue - I don't talk to management at all because I don't really want any more information than what is available in the public domain. I think management capabilities should be reflected in the numbers and track records, and not how well they can communicate with me (regardless whether they are being truthful or just talking up a good story).




Yeah, I'm the same. The accounts and the prezos tell me as much of the story as I usually need to know. A lot of fund managers seem to spend an inordinate amount of time meeting with management. I do wonder just how useful it really is.



			
				Klogg said:
			
		

> My take on it is, if there's something specific that I can't find and want to ask management, I'll generally send them an email... but it's rare.




I've sent the odd email too, but I could probably count on one hand the number I have sent.


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## Valued (5 December 2013)

Sometimes though there are questions I think management could answer in 5 mins but would take me hours to research myself. For example, the regulatory risks when taking a certain business overseas etc. If they don't know the risks then you should sell and if they do they save you a tonne of time if they explain it to you or point you in the right direction.


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## Klogg (5 December 2013)

Valued said:


> Sometimes though there are questions I think management could answer in 5 mins but would take me hours to research myself. For example, the regulatory risks when taking a certain business overseas etc. If they don't know the risks then you should sell and if they do they save you a tonne of time if they explain it to you or point you in the right direction.




Let me ask you this - if you haven't done your homework, how do you know they've answered the question in full?
Falls into the "unknown unknowns" category...

I'd rather spend the extra hour or two finding out for myself, then verifying this with management if I was so inclined.


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## luutzu (21 April 2014)

i'm beginning to really like these forums. 

I think talking to management and competitors, customers etc. would be useful. but as Fisher advised, you should know what you're after before you talk to them.

I think his ratio of talking to management and actually buying the stock is 2 to 1, while he looked at hundreds, thoroughly studied dozens... and only speak to ones that show exceptional promise.

I haven't spoken to any management.. .mainly because i haven't done enough study or have enough capital to make it worthwhile. So don't see what i'd be asking them about that isn't already, or should already, be on the Annual Reports.

Reminds me of this Chinese movie - 'The Emperor and the Assassin' - where the assassin, acting as an enemy state's envoy, came to see the First Emperor and present him with a detailed map of his state and the states around him. The emperor glanced at it and replied: "I have no use for this, i already know the entire layout of your land."

So I think that if you don't know enough about the company, talking to management and they'll paint you a nice and pretty picture and you won't know any better... which could be counter productive.

but if you know the business enough and want clarification on some issues that's not making much sense, i think it will definitely be useful.


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## Ves (10 May 2014)

I actually did this for the first time during the week for a small cap company that I was interested in.   I was straight up with them in an initial email and inquired whether someone was available to answer some questions I had about the accounts.

My initial query was in relation to cash flow vs the P & L (this is a company that has long-term contracts with their clients that are paid upfront,  and often partly booked on the P & L in future years, some times much later than the cash is received).

Found the company secretary was very approachable,  did not care that I was a small investor (with no position in the company) and answered my questions (and a lot more) with great detail.

I actually learnt quite a bit about the industry in general  (it's technical and fairly niche).

Highly recommended if you are unsure about something in the accounts and want to get a better feel for the company.


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## DeepState (11 May 2014)

In the past, those with strong relationships to top management were afforded an edge.  Then Regulation FD came out which meant that management had to be very careful about what they released to the market - making very sure that information was not being given to preferred parts of the market.  It had to be released in a way such that everything hit the market at once - more or less.  So every meeting now is closely scrutinised for fear than management becomes complicit in insider trading allegations.

Although management is now on a much tighter leash than days past and are quite scripted in what they can say and release, they are totally free to talk about their views on competitors and other entities.  Hence, value is still generated by seeing management, but less for the information they give on their own company and more for what they say about the industry they operate in.  This remains very valuable and is not contained in their annual reports, released to the media or otherwise published.


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## Value Hunter (14 May 2014)

Tell me Ves, after your recent experience will you be talking to management more often?


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## Ves (14 May 2014)

Value Hunter said:


> Tell me Ves, after your recent experience will you be talking to management more often?



Hi VH,

My process will remain as before,  and I will do as much of the research on the companies that interest me independently.  However,  it will certainly be an option in cases, where I am nearing the end of my research and there are gaps in my understanding that I believe management can fill with their answers.  Someone made a good point about management being very willing to talk to you in relation to their competitors,  they can add value here, and at the very least give you some further research to do.

At the end of the day,   now that I've had a good experience,  talking to management is just another tool in my kit bag.   Will use it when it is needed.


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