As a stock market investor, do you think it’s possible to have access to the management teams of the companies you invest in? My answer would be: it depends. I would be surprised if Tim Cook, Apple’s CEO, took your call if you tried to communicate with him. On the other hand, if you try to get in touch with the CEO of a small emerging company listed on the TSX Venture, chances are that he will be more than happy to talk passionately about his company with you. Most publicly traded microcap companies are unfortunately left to themselves. They receive little or no analyst coverage and are ignored by banks and investment funds because they are too small. This ecosystem therefore provides an opportunity for the individual investor to gain a privileged access to management teams who generally have a strong desire to get their story out to those who want to hear it.
In this series called ”The self-taught investor”, my goal is to share some thoughts and advice to hopefully help you become better investors. I strongly believe that success can be achieved by anyone if they put in the required efforts and have access to the right resources.
For those who don’t know me, my name is Mathieu Martin, I am 27 years old and I am currently a full-time private investor. I spent many years working for my parents’ businesses while simultaneously being successful as an online poker player. My journey into stock market investing began in March 2014 when I became curious about Philippe Bergeron-Belanger’s strategy and I decided to invest in microcaps like he did. In my first 3 years as a microcap investor, I managed to multiply my starting capital by more than 3 times and this, without any academic training in accounting or finance. Thanks to my self-taught skills, I was able to learn the investing basics and through this series I hope to be able to convey to you this curiosity and desire to learn more.
In my opinion, it is very important to try and get in touch with a company’s management team before investing in it. This is a unique opportunity to deepen one’s knowledge about the company and gain a head start on other market participants. I use mainly 3 ways to get in touch with company CEOs: sending emails, making phone calls and attending conferences and other networking events.
In general, I use an email to initiate the first contact with a company executive. I begin by introducing myself, I let him know that I have an interest in learning more about the company and that talking to management is part of my due diligence process. I then ask the person if she is open to answering a few questions either by email or by phone at a later time. I will lean towards emails when I only have 2 or 3 questions that do not require lengthy explanations and will prefer phone calls when I have several questions. In my experience, the success rate with an email introduction is usually very high.
2- Phone calls
I rarely use the phone to initiate a first contact, unless it is a private placement opportunity on which I feel the need to act quickly. Otherwise, I plan the phone call ahead of time so I can be well prepared when the time comes. I have a great deal of respect for the time that these CEOs, who are often very busy people, devote to speak with me so I make sure that I am ready. My goal is to maximize the information that I’m able to get from the call but also to make my interlocutor feel that I have done my homework and that I am serious about this.
3- Conferences and other networking events
Microcap conferences are great opportunities to initiate contacts with many companies in a short time frame of only 1 or 2 days. These events are usually divided into two parts: public presentations in front of an audience and 1 on 1 meetings. When I travel to conferences, I always prefer to go for 1 on 1 meetings since this format allows me to get a more personalized presentation but also to ask questions along the way. On a typical conference day, I can meet with as much as 10 to 15 different companies. I always make sure to take the business cards of my interlocutors and this allows me to follow up afterwards with the companies that I thought were the most interesting. Other networking events such as our 5 to 7 cocktails in Montreal are also great opportunities to meet 2 or 3 different companies in the same evening without the need to travel abroad.
If you don’t have the business card or contact information of the executive you would like to reach, there are several potential ways to find it: on the company’s website, at the bottom of the press releases, on Sedar.com in the “Issuer profiles” section, by asking someone in your network, etc. Be creative, there is always a way to find!
How to prepare an interview with an executive
Here are some tips to help you make the most of your phone call or in person interview with a small publicly traded company executive:
- Be ready: Do several hours of research on the company before thinking about talking to the CEO. Do your homework and prepare good questions. I always make sure to have a list of questions to guide the discussion and to cover the topics that are most important for me. A good list of questions, in my opinion, should be between 6 and 12 questions. Your interlocutor has limited time and you do not want to abuse it. If necessary, you will be able to follow up at a later moment.
- Introduce yourself first: Company executives always like to know who they are talking to in order to adapt their speech according to what is most likely to interest you. If you are a banker who wants to organize a multi-million dollar financing, the discussion will not be the same as if you are an individual investor seeking to know more about the competitive advantages of the company. Briefly describe your occupations, your investment criteria and what lead you to be curious about this particular company. If the meeting is in person, do not forget to exchange business cards!
- Let the executive briefly describe his company: Unless I know the business extremely well and have a long list of questions for the executive, I usually prefer to let the person offer a brief introduction to his business. Hearing a quick presentation from the CEO is often quite different from reading the investor deck or the various official documents of the company. In a quick introduction to the company, the executive will usually focus on the most important elements describing his business and this might quickly enable you to identify the key competitive advantages or the most promising product or service lines, according to that person.
- Ask the right questions: A good question should be simple (avoid questions with multiple layers) and open. Ask questions that allow your interlocutor to elaborate on his thoughts and not simply answer by yes/no. Also, be careful not to ask questions that the manager cannot answer due to the lack of publicly available information on the topic. For example, you cannot ask the CEO about the revenue and profits for the quarter that has just ended if these results have not been publicly disclosed beforehand. Any material information that has not been published explicitly in official documents should not be discussed.
- Listen carefully: Show your interlocutor that you are listening to what he says by nodding occasionally and showing that you are attentive. Take advantage of opportunities to deviate from your list of questions from time to time when the executive discusses an interesting topic that you had not thought of during your preparation.
- Thank him and suggest to do a follow-up: When I finish a conversation, both in person and on the phone, I always make sure to thank the executive for his time. I let him know that I will review my notes, continue my due diligence and contact him by email if I need to clarify something. This leaves the door open for a follow-up in the future, if I happen to have more questions or if I decide to invest in the company eventually.
This is what summarizes my preparation process for an interview with the executive of a publicly traded microcap company. I will use this process again in the next few days to prepare myself for the Planet MicroCap Showcase 2017 that will be held in Las Vegas in just over a week. More than 15 Canadian companies should attend and I plan to have a busy schedule of 1 on 1 meetings!
Looking forward to communicating with you again when I return.