Catch up with your Past, before it Catches up with You

Just as IROs perform due diligence on investors (holdings, past interactions, etc.), a well-prepared investor will carefully comb through your written record. If you failed to meet targets in the past, trust can evaporate swiftly, sending investors running for the hills bringing even further challenges.

Investors, as part of their fundamental research relish a deep dive into historical data, scanning the fine print looking for red flags. Others wanting more insight, will go back 5-10 years to pour over a company’s annual and interim reports just to build a simple financial model.

Warren Buffett has said he loves to curl up with companies’ annual reports. When asked how to get smarter, Buffett once held up stacks of paper and said he “read 500 pages like this every day. That’s how knowledge builds up, like compound interest.”

For Buffet and others, it’s more than a treasure hunt but the thrill of discovery that drives them. These Sherlock Holmes start with the 10K paper trail, like the note from the chairman or, comments from the CEO where they assess the discussion on strategy and performance. Often, there is no specific agenda in their research other than verifying if what was said in the past held true. Rather, these economic detectives care less about how well a business is doing right now, and more about how it is doing compared to expectations.

Earnings calls transcripts can provide key insights about forward earnings and revenue guidance that isn’t present in company filings. Listening for key details help investors put the business in context—for better or worse.

No matter what the reasons behind your performance, a shrewd investor will inquire about a previous microscopic financial footnote or perhaps, guidance in the MD&A. Be mindful of what you say and how you say it. If you don’t curb your salty tongue—you could drive investors away, instead of attracting them.