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Analysts and influencing the share price |
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Written by Tim Richardson
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Thursday, 04 October 2007 |
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Recently I attended an in-house professional development seminar. Most of the day was dedicated to harnessing our passion and improving our empathy. A highlight was however a presentation by a Dutch analyst following Philips (PHG). He went over valuation models and techniques, which caused no surprise but lead to interesting discussions. The models are not sophisticated (no bad thing given the uncertainties in the assumptions) but it was pleasing to see different models applied for different divisions, recognising the strength of Philips Lighting's vertical integration and large capex base (and high margins). I was greatly surprised by just how much marketing there is between institutional investors and analysts. Our presenter worked for a large bank, and part of his role is to advise clients (institutional investors) about stocks. Despite the theories of efficient markets, institutional investors are just busy people trying to keep on top of a lot of information, and face-time with analysts, and senior management, can really influence buying decisions. Another clear take-away is the harm and stickiness of a reputation for poor forecasting. For the past five years, Philips has been strong, but a reputation from earlier lingers. Our presenter showed us a slide he uses with clients, proving how reliable Philips has been recently. He said that this slide is frequently greeted with surprise. So even in this world of big money and professionalism, prejudice and frail memory play a role. I left the day with a very clear impression of how important it is to get simple messages across to analysts, business media and institutional investors. Thanks to my colleagues who organised this day.
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Last Updated ( Thursday, 06 March 2008 )
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Professional