It is often said that institutions have an advantage over the individual investor because of better corporate access. Institutions are able to meet with top-level management, sometimes as much as every quarter. They get to attend investor conferences and are given on-site tours. How is it possible for the little guy to compete with that?
Actually, the playing field is more level than you might imagine. The SEC introduced Regulation FD in 2000, which explicitly prohibited the dissemination of information on a selective basis. On the whole, management take this seriously and are now much more careful about providing the same information to all investors simultaneously. Gone are the days when inside information would be disclosed to select groups behind closed doors. And the tools we have today allow the individual to get almost all of the same information as the institution. Here is a how you can do it on the cheap:
- Listen to the webcasts. Almost all companies now broadcast quarterly analyst calls on their websites. Download the analyst presentation and listen to the webcast, together with the Q&A. Often the press release will include details of the conference call so you can even dial-in and ask questions yourself.
- The same goes for investor days. Most companies will broadcast the entire contents of the investor day online. This can be a great tool if you want to get a deeper feel for who management are and what the long-term strategy of the company is.
- If there is an event or a piece of corporate news that needs clarifying then there is nothing to stop you from calling up investor relations and asking them questions. This is a resource intended to serve all investors, not just large institutional ones. To give yourself additional credibility you can explain that you are an analyst for StockViews or for Seeking Alpha. It helps if you have already published an article on the stock.
- Again, there is nothing to stop you asking IR for a call with management. While you are unlikely to get a call with Tim Cook (CEO of Apple), you are likely to have more success when it comes to smaller companies or if you want to get access to lower-level executives. In most cases it is actually more rewarding to talk to executives other than the CEO or CFO because you get a perspective that is different to the polished view that is presented to Wall Street.
- Even if you can’t do an on-site visit there are usually ways for the determined investor to get an insight into the people and the culture of an organization. The legendary growth investor, Phil Fisher, called this type of information “Scuttlebutt”, and his message is even more relevant in an online world. Check out this video on Fisher’s methods.
Companies and IR departments are waking up to the fact that big institutions are not the only investors that matter. With many equity analysts creating a significant impact online, this is a community that can no longer be ignored. Companies that overlook these smaller investors do so at their own risk!
P.S. If you’ve had any experience of reaching out to company management or IR (both positive or negative), then we would love to hear your thoughts here