By: Bill Spencer — September 28, 2019
Happy Saturday everybody...
Big Bill here.
I'll bet that no one has ever told you what I'm about to share. But I promise you -- what follows can take you from zero to sixty as an investor tomorrow.
So listen up...
(Click the lower-left arrow to watch video)
The very good traders I've known all diligently study a stock's fundamentals as well as the stock's technical setup -- the chart. They read everything before making a move.
But the best traders I've known, guys I'd call my mentors and even my heroes... all bring an extra miracle ingredient to their due diligence.
They pick up the phone... or they get on a plane and go hear and see for themselves what's really going on with a company they're interested in. They passed this "superpower" of theirs on to me, and now I'm handing it off to you.
A few things...
First, I have a lot to say about this topic, so we won't cover all of it today.
Because every situation is unique, I can't give you a list of "best" questions to ask someone high up at a fund or a firm. (Heck, I'd love a list like that myself.)
And finally, this isn't a gossip column, so I won't reveal the names of people I've spoken with. Much of what I've heard (and almost all the "good stuff") is told to me in confidence, and betraying a confidence isn't just wrong, it's very bad for business.
So here are some solid guidelines to get you started, so when you get that CFO on the phone you can extract the most value from your conversation.
For some folks, the idea of calling the head of a $1.7 billion firm seems daunting or even crazy. After all, why would a busy top executive want to talk to little old you?
I'll tell you why.
Because you're looking to put your money into their enterprise. And I don't care if you're out to buy 10 share or 10 million... you're a source of capital, the lifeblood of any business. They damn well better be interested in talking to you.
If they're not, cross then off your watchlist.
And take it from me...
When I was starting out, the idea of calling some big mucky-muck at a giant firm scared me half to death.
But I soon figured out that there are people at every firm who would talk to me. Just like there are people who'll talk to you. And not just the obvious "investor relations" guys or gals who are paid to speak to the public.
You can get top executives on the line, especially at small-cap companies where frequently just a handful of people run the whole show.
Often, a brand new CEO or CFO will be dying to tell you their story, and about their big plans for the future. They want their face seen and their voice heard. Plus, as the "new broom" they can't risk seeming evasive or timid. This is especially true if the company is pitching a "turnaround story".
And if nobody at a company is returning your calls? That alone tells you something. Namely, that they don't think investors -- owners -- are worth treating with respect. Cross them off your list.
When you do get "voice time" with someone, ask clear questions about specific topics. That way, you'll come across as a knowledgeable investor with a pro attitude.
And make it a conversation -- two guys smoking their pipes, talking shop.
Always be respectful, but don't let anyone get away with summarizing the press release at you. Probe deeper.
Your strategic goal is to cultivate relationships here. After all, you might want to talk to some of these same folks in the future. Make sure they'll look forward to talking to you.
Never leave anyone feeling you've wasted their time. Do your research before picking up the phone.
I'll never forget the second call I ever made.
It was back in 1999, I was speaking to the head of investor relations at a mid-stream oil service company, a very sharp lady named Rebecca. She talked at length about fascinating stuff, such as how the company was shifting focus toward organic growth.
"Can I quote you on any of this?" I asked. (I was working on an investor note.)
A long, awkward silence followed. "Well, Bill... I mean... This is no secret," she said, puzzled. "It's nothing we haven't been telling investors".
Egg, meet face!
Had I done more reading, I would already have known everything she was telling me. Since then I've made it my mission to learn everything I can about a company before I call.
Always guard against interpreting peoples' words in a way that favors any answers you already think likely. If you don’t, you'll end up investing based on your own biases. You'd be better off flipping a coin.
Here's what I mean...
You're ready to buy a particular stock. You've done your due diligence and think you have a pretty good idea about what's going on with this company.
You call to ask about, say, rumors of an impending merger. Or a spin-off or bolt-on acquisition. All well and good.
The worst thing you could do is to "listen for" proof that your pre-determined opinion is true. Because if you listen for it, you'll certainly hear it, even if no-one actually says it.
Finally, let me leave you with a secret.
And that is that you actually have a leg up on many of the people you'll be talking to.
It's funny, but people, even top executives, tend to respect what they don't understand. And few executives really know how to see the market. They're business people, not technical or sector traders.
I always open my first conversation with an executive with something like, "I'm really excited about your company. I've been studying the chart for a while now, and I love that [insert technical development]".
This is a great ice breaker because, for one thing there will always be something exciting on their chart, or something relevant happening in their sector. You wouldn't be digging deeper if there weren't!
For another, beginning the conversation this way frames you as an "expert" or an "insider". You'll establish authority immediately with the people you talk to. You're not just a guy in a diner.
And whoever you're taking to will think twice before trying to snow you.
More to come...
Enjoy your weekend and I'll see you soon,