Thursday, October 28, 2004

Five Rules on How To Listen to A Conference Call

I've been thinking about my posting below on the Overstock conference call. I'm not a huge conference-call-head-- but I could be. You think blogs have all the dirt? Forget it.

The Q&A session in conference calls can be as informative as any investment source out there.

But typically, you have to read between the lines. Rules for listening to a conference call:

1) Ignore the prepared remarks -- they're carefully scrubbed to avoid interesting information, and most that stuff is in the press release. Okay, when I'm on TV, I often mention what's in the prepared remarks, because that's the official story; guidance, details on revenues, etc. But most of it is drek. And the more concerned with P.R. the company is (i.e. Hewlett-Packard) the more worthless I find the prepared remarks.
2) Don't miss the Q&A -- that's where you get a clue on the un-official story. Smart analysts are watch things besides revenues and earnings-per-share. And sometimes this is the only place where media-shy critics of a company raise their voices.
3) Read Between The Lines! -- the real story of what's going on with a company is hinted at in these Q&A sessions, but rarely is it explicit. Why? Because you can...
4) Forget Regulation F.D. -- Analyst know that if their questions are too tough, access to the company will be shut down. So you have to listen to what's suggested rather than what's plainly said; what types of questions are being asked.
5) Don't Trust the Short Sellers -- I'm a big fan of short sellers, they almost always do more homework than the longs. And they get a bad rap constantly, everywhere. But one of the reasons they get a bad rap is that some scumbags get on these conference calls, plant phony rumors, hoping to drive the stock down to cover their ill conceived investments. I don't think that strategy works, but when you read between the lines (you remember that part? instruction No. 3?) part of your responsibility is to read into the motivation of every questioner. A conference call is where you get an idea, but not a tip. Tips are for waiters.

Got more? Please, I share your comments!

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