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Monday, March 27, 2017

Earnings results conference calls

Posted by Robert on May 14, 2012

Oh joy. I listened to three conference calls this week, and I spoke with a CEO of a fourth company on the phone for a few minutes. To be brutally honest, I didn’t listen to the last batch of conference calls because they can be extremely dull. It’s slightly better than reading financial statements, but not much. So why do I do it?

First, it helps me connect to the companies I own. Actually, I only own a tiny percentage, but that ownership represents a relatively large portion of my net worth. I want to feel that I can trust the people who are managing this companies in an effort to be able to provide me with a steady dividend. I wouldn’t want to manage even one company, much less a dozen, so I’m happy to have professionals running the company. That doesn’t mean that management will necessarily keep my interests at the forefront, but listening to them speak gives a pretty good indication of the issues that are driving the corporate agenda.

Second, I like to know what the outlook is for the company. I read the financial statements and I try to find the good news as well as the bad news. I look for any trends or “red flags” that might be worrying. Then I listen to management’s perspective, followed by questions (usually by investment analysts). Is there good news I misunderstood? Is there bad news that I didn’t give enough weight to? Are there credible threats in the near future? But, more than anything, should any of these perspectives change my decision to own this company? During a recent call, the CEO (who is also chairman of the board) talked about long-term investments in building capacity, but failed to share a concrete strategy that was driving the investment. His lack of obvious enthusiasm probably contributed to some of the tough questions that he was asked about vision and planning.

Finally, I need to understand my investments. If I don’t understand how a company makes a profit, I won’t invest in it. If I understand that a company has a seasonal pattern to its profits, I can remain invested despite seasonally poor results. And as I listen to presentations and questions, I better understand the organization and competitive pressures that affect the company.

One of the other benefits of listening to conference calls about company results is to get a better sense of how the economy is currently functioning. Three of the four management teams seemed optimistic and sounded positive about the outlook. Only one company claimed to be struggling due to economic circumstances. It really makes me question why things are different for just one company.

Do you go to these lengths with your investments?

Comments

3 Responses to “Earnings results conference calls”
  1. I definitely “watch”my investments, but I have listened to conference calls very occasionally.
    Problem is tat I am a “Joe-blow investor”. An ordinary guy. They will not listen to me.
    You are in the “industry”.
    How could I “go to these lengths”?
    So, what advice do you have for me???

  2. Robert says:

    CanadianMDinvestor, you’re just an ordinary investor. But if you own any shares in a company, you have a right to listen in to their conference call. On any of the calls I’ve listened to, there is no restriction of participants. You can usually find the date, time, phone number and passcode (if there is one) in the press release or invitation. If you’re not getting invitations, you can often email the CFO or investor relations person to be added to the distribution list.

    I haven’t yet asked a question, so I think the first step is just to read the financial statements (and think about them critically), then to listen to management’s perspective on the call. If you have questions, that’s the place to ask them. I’ve never heard management be rude about questions, even from individual investors. After all, they work for shareholders. If you want them to listen to you, because you have advice or insight, a conference call would not be the place to share it. Instead, you should ask for a private call with management or with the board of directors.

    You don’t have to listen to the conference call. You can usually learn all you need to know from the financial statements. But I like feeling involved in the companies I own, since I hope to own them for the long term.

  3. Jacq says:

    I read the transcripts afterwards. Listening would be better since you can hear tone of voice – but I’m too short on time to do more…

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