The Long and Short of It: Inside the Mind of the Buy-Side

September 17, 2018 05:30 PM EST
Domain 4:
Marketing and Outreach
Domain 8:
Capital Markets and Capital Structure

On Monday, September 17th, NIRI New York hosted a panel discussion on how the buy-side thinks and makes decisions on equity stories, and ways to communicate with investors given the shrinking pool of investment dollars available for fundamental investment styles.

The event was held at Nasdaq MarketSite and moderated by Michael Stiller, Global Co-Head of Nasdaq’s Strategic Capital Intelligence Group. It featured panelists Jillian McIntyre, Managing Partner, Founder & CEO of 221B Capital Management, William Marble, Managing Director at Dockyard Capital, and Alex Derbes, portfolio manager at Gilder Gagnon Howe & Co. These panelists represented an interesting cross section of assets under management, investment styles and approaches.

The panelists weighed in on how they make decisions around both long and short investments. Prior to a long position, investors host discussions with management as well as more broadly within the investment community to research a thesis. For a short idea, initially they may avoid discussion with management or other investors in order to research contradictions in the normal market dialogue. Jillian introduced 221B’s investment framework “5Ms” – management, mendacity, model, mediocrity and mania (valuation) as its internal framework, particularly for selecting those companies to take a short position or recommendation. All agreed that disruptive technologies have created opportunities both on the long and short sides and impact a broad cross section of industries. Quant fund positions typically have no impact on their decision-making process.

In terms of interaction with the sell-side, the panelists believed that the most valuable service provided by the sell-side is coordinating meetings with corporate management teams. With that said, they would welcome direct outreach by the company for meetings with senior management and encouraged corporates to build long-term relationships with investors who may reinvest in the company at different points in the cycle. They were all very open to direct outreach from IROs who have a clear story to tell. The panelists concurred that none of them would own a company without a strong view on management.

The discussion concluded with the panelists providing their best tips for IROs, which included:

  • always have an updated, accessible, easy to understand investor deck on the website;
  • small investors could be a gateway to larger investors; and
  • don’t be fixated on the stock price – IROs should be helping their management teams to focus on running the company.

Our thanks to Angela Chang, Director at Rose & Company, who provided this summary.

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