What you can learn by attending an equity conference

What you can learn by attending an equity conference

Each year brings forth a new batch of invitations to equity and investor conferences. At first glance, the conferences seem informative. But is there really any value in attending? Well, having just gone to my first one for some time, I thought I’d present a few thoughts on what I think you will – and won’t – get out of a conference.

First, some information if you are not familiar with what an equity conference is. It is basically an event organised by an investment bank whereby they invite clients (investors) to listen to presentations by the management of different companies and also for the investors to have the opportunity to sit down with the management to have a deeper discussion of their business.

Macquarie has during the last three days organised their annual conference in Sydney with over 100 different companies presenting. It was a very well organised conference and very well attended by investors.

What you won’t get out of a conference

Let me first start with what an investor is likely not going to get out of a conference:

• You are not likely to learn any new information that was not in the public domain before. Company management is nowadays very disciplined with the way they release information and it would be exceedingly rare to learn anything new that you could not have found out through already publicly available information.

It is therefore fair to say that attending a conference is unlikely to provide you with any direct actionable information for making an investment decision.

What you can get out of a conference

What attending a conference does instead provide you with is:

• An opportunity to compare and contrast in 2 different ways:
  1. You can listen to what different participants in an industry are telling you. It can be very useful to hear and contrast what companies operating in different stages of a supply chain are seeing as it normally takes a while for changes in demand or supply to propagate up or down the chain. There is a clear benefit in being able to side by side compare what 2 companies are telling you about the same industry.
  2. You can directly compare the trends in different industries and decide if there are any conclusions you can draw from comparing them to each other or if they influence each other.
• A chance to get a good snapshot of the economy by getting a wide range of views from different sectors.
• The chance to network and share ideas with other investors. Most people who have been in the market for some time learn to appreciate that there are many other smart people out there who have a different perspective on things than you do. Being humble and sharing information is often a very worthwhile investment in what you will get back!
• An opportunity to judge what the market is collectively interested in. A key item I always take note of is the number of attendees for each presentation I attend. This can be very useful information to compare direct between companies and industries but even more interesting is to track this over time. I have found that there are often higher possibilities to find promising investment ideas in companies/sectors where there is little current interest and this (together with the number of sell side analysts covering a company/sector) is the most reliable way I have found to judge what the market is interested in.

In effect, a conference gives you the opportunity to compare and contrast and gives you an idea of where to prioritise your work.

So, what were the key conclusions from the conference? I am still digesting, but some things that stood out were:

• There is significant interest from the investment community in the retailing sector and particularly in the areas that might be affected by Amazon’s entry into Australia. The companies in such sectors are clearly aware of the threat and are working on their strategies but nothing I heard makes me differ from the views that have been expressed on this blog before (for example here).
• The sessions with APA, AGL and Origin were very well attended. It is quite clear that gas and electricity prices will stay elevated for quite some time due to the lack of availability of cheap gas. Electricity generation by gas is necessary to firm up intermittent renewable generation and, until battery storage costs falls enough, we will have to live with elevated electricity prices. As readers of the blog probably recognise, we are unlikely to invest in electricity generators and commodity extractors due to the cyclical nature and inherent lower quality (as measured by sustainable margins and return) of these businesses but we are concerned with the impact energy prices will have on the wider economy as electricity and gas are significant input costs for many industrial companies.
• The presentation with least attendees was Star Entertainment, the operator of casinos is Sydney, Gold Coast and Brisbane. This is probably to be expected given the dynamics of the industry recently; this is just an observation and not meant to be taken as investment advice.