Meetings between public company managements and investors are the bedrock of the fundamental investment process. The reason for that, however, is often lost in translation. It is not, for example, because most investors or analysts are systematically better at reading “Body language” about the quarter or new products. Seriously – they aren’t. No – the reason that management meetings are useful is because, over time, managements let down their guards and act like regular people. And in those moments, truth – about character, about wisdom, about judgment – comes rolling out. Today we offer up a personal highlight reel of examples from +20 years of management meetings.
Management meetings are the coin of the realm on Wall Street. Most surveys of institutional investors put about 60% of the commission spend on the Street soundly in a bucket dedicated for brokers which pair up clients (investors) with the C-level executives of public companies. At first blush, this might look like the old-boys-and-girls network at play – big money cracking open a bottle of the good stuff to get tips from chief executives. In reality, regulations regarding what management can say are stiff indeed, and nobody wants to feel the brunt of a regulator’s ire for tipping off some hedge fund about a lousy quarter.
So why bother with the meetings at all? Some investors think they are better than most at reading body language or tone of voice in response to a tough question. I’ve never seen anyone really get this right on a consistent basis, however. You just never know if the queasy reaction you are witnessing is about the current quarter’s financial results or some questionable sushi at lunchtime. Yes, there is a bit of self-perpetuation in the management meeting process these days. If I saw 130 company managements last month, I’d better see 135 over the next 90 days. Not a great reason, but it does explain the persistent pressure to see more and more companies.