Expert says - back to basics in IR

When a fund manager with decades of experience in stock picking speaks, we tend to listen. Anthony Bolton’s new book (Against the Tide by Anthony Bolton. Published by FTPH, price £14.99. © Anthony Bolton 2009), has some very important messages for IR practitioners.

In discussing how he approaches analysis of a potential investment in a company, he starts with the narrative. What business is the company in? How sustainable is the sector and the macro prospects for that sector? What is the ‘equity proposition’ and will it make money over the next 10 years?

Importantly, Bolton emphasises that he reads in the original the results press releases put out by companies. He does not rely entirely on commentary and analysis from either the media or the sell side.

These attitudes emphasise once again the importance of wordsmithing in news releases, in annual reports and other media through which the company communicates to the market. The “tonality” of company news is driving investor decisions and indeed automated trading systems in a major way.

Next, Bolton’s comments reaffirm the need to profile the experience of senior management. He looks for managements that are fanatical about the business, and understand it nuts and bolts. He says he prefers companies where management has a significant personal shareholding, and of course those where the shareholding is increasing. Corporate communications that highlight that level of commitment, rather than just a ‘Directors Dealing’ release, will help win the support of investors like him.

And again, thinking about how the business can be explained, he wants the business model and the equity proposition to be simple to understand. Clarity in company-generated news, building the picture of the company will help.

These sound like truisms, gee whizz. But I am constantly amazed at how few companies follow the most basic rules of marketing, in IR. Have we reached a stage where we are so focussed on the technicalities of IR, that we have ‘assumed’ the fundamentals are taken care of. Anthony Bolton in his comments seems to think it is worth reminding us.