Direct targeting at WW Grainger
The investor targeting process at industrial distributor WW Grainger starts in the fourth quarter of every year with the mammoth task of narrowing down a field of 8,500 buy-side firms to a list of targets likely to invest in, and hold, the company’s stock. So says Bill Chapman, senior director of IR at the firm.
Bill Chapman, WW Grainger
He and the IR team split promising candidates into two categories: those that have invested in other stocks in the industrials sector with similar statistics to Grainger’s, and those whose investment criteria match Grainger’s attributes. This is all carried out without broker intervention. ‘Our targeting process is completely independent of the sell side,’ Chapman says.
When members of the IR team are on the road they often tell brokers or analysts who they are going to meet – not the other way around, says Laura Brown, senior vice president of communications and IR. ‘We review their requests very thoroughly and match them against our target list to make sure we’re maximizing management’s time and our own time to meet with investors we think are the best fit,’ she explains.
Brown and Chapman agree the relationships they and management have with the sell side are important, as is traveling with brokers and educating them about Grainger. But there are just too many analyst requests to honor, and although some analysts follow the firm closely and are very knowledgeable about it, Brown says there are others who cover many companies across the manufacturing space who may not pay too much attention to a specialized distributor.
‘We’ve been doing this long enough that we know the sales representatives from the best sell-side firms that cover us,’ says Chapman. He and his team will even take advice from those they are closest to about the best markets to head to, depending on the relationships already in place with the buy side. They also invite sell-siders to accompany IR and management on roadshows, and ask them to gather feedback once roadshows are over.
Chapman recommends surveying investors in a market you are unfamiliar with to find out which analysts they prefer. ‘We went straight to the buy side. We sent an email and called some people and asked, Who does the best job? or Who do you think we should travel with? And we used that to make our decision,’ he explains.
The IR team’s targeting filters have become ever-tighter as it becomes more experienced with the process, boosting effectiveness. ‘We also produce quarterly reports for management, based on progress toward our annual targets, detailing how many key investors we’re meeting with,’ Brown says. ‘I think management relies on the IR team to guide the targets.’