Feedback from Citigroup's sellside analysts on what they want from IR
Matt Carpenter, director of Citigroup Investment Research Americas, participated in the IR Magazine West Coast Think Tank in Palo Alto in March 2006. In preparation for his discussion with over 40 IROs, he gathered comments from Citigroup’s US equity analysts. Here’s what they told him.
- Building relationships, educating and communicating are important roles of IR professionals.
- Handling both positive and negative information in a forthright manner preserves and strengthens relationships with analysts and investors.
- It’s important for IR to provide access to business-line personnel who will openly discuss strategy and what drives the top and/or bottom lines. ‘We have over 80 analysts in New York and San Francisco, and before I came to the think tank I asked them if there’s one message I could give to the group here,’ Carpenter says. ‘A number said they would love more access. I would very much encourage you to pick those division managers who you trust and consider capable. You certainly don’t want them to spend eight hours a day doing this, but allow analysts to get some access.’
- The best IR professionals know their company as well as the CEO and CFO do. That knowledge should include their industry’s competitive forces and consumer trends, as well as both the letter and the spirit of industry regulation.
- The sell side promises – and has a fiscal responsibility – to be objective, and all analysts should be treated with the same respect regardless of their opinions.
- IR professionals should proactively contact analysts and investors if they suspect a potential misunderstanding. ‘The job of analysts is to deliver their 100 percent unbiased opinion, whether securities are overvalued or undervalued,’ Carpenter adds. ‘If you’re concerned about an analyst’s opinion, don’t go to the investment bankers, which I’m shocked to note is something people still do. Go right to the analyst or come to me, and we’ll come back to you.’
- Responsiveness and honest dialogue must be guiding tenets for IR professionals.
- Since buy-side analysts are stretched thin of late, investors have an even greater reliance on sell-side research (particularly on small and mid-cap names). In many cases, the sellside product is used by the buy side to consider whether to investigate a company or is the primary criterion in a decision to buy or sell shares.
- It would be helpful to establish a standard way to report earnings, enabling an apples-to-apples comparison. Citigroup’s proprietary database, DataCentral, requires its analysts to be consistent in their financial modeling.
- Providing guidance is much more important to investors than it is to analysts, as it provides a view into a management’s planning process and style and establishes a metric by which to measure a company’s progress and performance.
- Think like an investor/analyst. Build a five-year financial model for your company using the resources an analyst would use. This exercise will highlight the same short and long-term issues that would be raised by investors or analysts. Through the process of establishing responses to those issues, IROs will be able to identify a more effective way to communicate with the sell-side audience.
The next IR Magazine Think Tanks will be in Toronto on September 28 and New York on November 15, 2006.