What was that? I can’t hear you when you whisper

What was that? I can’t hear you when you whisper

Over the weekend, former fundies Greg Perry and Peter Morgan revealed that selective corporate briefings was/is a practice that is rife, gives advantages to fund managers at the expense of smaller investors, and should be outlawed. We agree.

CEOs and CFOs are only human, and keeping track of everything that has been said in previous briefings and the media, while at the same time keeping a list of what can and cannot be said, is simply impossible. This is especially true if managers are subjecting themselves to being inundated with questions on a constant and/or irregular basis.

We don’t boast about meeting with 300, 400 or 700 companies in a year. Why advertise having so many meetings if there is no advantage in doing so? So to go back to Perry and Morgan’s point, yes, there must be an advantage that fund managers, who have access to company boards or management teams, have over retail investors.

One can only conclude then that one of the possible intentions of seeing so many companies could be to garner some edge, some insight or some slip of the tongue that provides a hint or clue as to the changing prospects of a company.

Clearly, fund managers meet with companies to gain a better understanding of their business, but once this has been established, what purpose do further meetings have – if not to garner an extra edge?

At Montgomery, we do things a little differently. There are simply not that many companies that meet our criteria, and therefore, not many that are worthy of our attention. And as we don’t trade on rumours, body language, innuendo, slips of the tongue, or ‘slip ups’ of management who have forgotten what they previously said or forgotten what they are allowed to reveal, we have no need to ask a company for special meetings.

As a result of our peculiar style, we think there is an elegant solution to the debate about selective company briefings. Irrespective of whether ASIC attends or not, we believe that each company should schedule three to four Q&A briefings a year (more if there is an acquisition or some other transformational event). Importantly, these briefings should be open to all investors and to every analyst. And that’s it.

Levelling the playing field this way might just sort out which fund managers have been gaining a pat-my-back-and-I’ll-pat-yours advantage. Those who complain the loudest about this suggestion may indeed, to quote Shakespeare, be protesting too much.

If an analyst cannot make one of the scheduled events they’d better send someone in their stead.

The rest of the time, the company can go back to running their business. And corporate advisory services might just get that bit cheaper for companies – and their shareholders too.

MORE BY RogerINVEST WITH MONTGOMERY

Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.