Driving (Targeting) Success

June 29, 2023

Golf is a game of precision, where players primarily focus on carrying distance and rarely on how much the shot is going to roll out (unless they find themselves in a challenging patch of thick rough, of course). To guide the golf ball across a sprawling expanse of grassy terrain into a small hole with as few strokes as possible, golfers employ a variety of 14 clubs, a set of specialized tools to achieve their objective. Each club with its unique angled head helps to create a specific trajectory for the ball when it is hit.

Investor relations is strikingly similar, in that targeting is just one tool used to reach a goal. However, the buzz surrounding the implementation of AI in targeting has generated a considerable amount of skepticism (mostly among industry stakeholders) who lament a lack of suitable investors to target. The prevailing viewpoint is that large-caps, historically the focus of long-term investors, are the only stocks with trading potential. Proponents suggest there exists only two avenues through which one can enhance shareholder value: size, and catalysts, while bemoaning the fact that hedge funds, highly visible at investor conferences in recent years, are unworthy substitutes for institutions.

While it’s true long-only investors historically chase benchmark index returns, and to achieve that focus on large cap holds, the claim that hedge funds are inherently bad for a small cap’s shareholder register is false. Hedge funds, family offices, and high net worth individuals are in pursuit of alpha, and are willing to take on much more risk than long-onlys. But not all hedge funds are evil. While they may be more inclined to short a stock to generate alpha, they are much more likely to invest in a good story with a solid investment thesis. These types of investors are the holy grail for small caps—they provide much needed liquidity, which will in time, drive interest among long-onlys.

The fear surrounding hedge funds is manifold, led by controversial activism and other noisy activities. (As an aside, a fair number of activist hedge funds have shifted to long-only activist strategies and, as a result, there are more funds than ever doing activism, according to a recent article in Pensions and Investments which quoted Joshua Black, editor-in-chief of Insightia, which tracks activism and proxy issues.)

Institutional investors for their part, with their much longer time horizon, take a more gradual approach when it comes to making investment decisions. To get on their radar, you first need to get noticed (no easy task). Then, you have to make it through committee which is potentially wrought with personal, political and social potholes. Even if it does pass muster, it may wane as a death star before anything actually happens due to numerous outside factors outside of your control.

One of the core tenets of good IR is building a rapport with investors, and hedge funds in particular, depending on their size and industry, enjoy direct access to management. Good disclosure and sustained, consistent communication can make or break these relationships. Like any relationship, short-term concerns (quarterly results are often just noise) are unlikely to move committed shareholders.

Stock fluctuations are, of course, par for the course but as long as every stakeholder (internally, externally, investors, analysts and the media) are given a consistent narrative, with clear steps about growth, your investors are likely to hang in regardless of the quarterly results.

Good targeting is both an art and a science, requiring a blend of intuition, creativity, and data-driven analysis. Adding AI to the mix can help refine outcomes and augment decision-making, however, targeting is all about understanding individual investor preferences, building relationships, and effective communication. Just as a golfer needs to bring their personal touch and expertise to each shot, investor relations must rely on their interpersonal skills and expertise to establish meaningful connections and engage with investors on a human level.

In addition to investor targeting, our team at Harbor Access can help you get noticed. For inquiries about your investor relations marketing services, reach out to:

Jonathan (US): Jonathan.Paterson@Harbor-Access.com

Graham (Canada): Graham.Farrell@Harbor-Access.com