“Auditur et altera pars. (The other side shall be heard as well.)” – Seneca
“There are two types of people: Those who come into a room and say, “Well, here I am!”, and those who say, “Ah, there you are” “- Frederick L. Collins
This update finds me in a grumpy mood. I am sulking at the intransigence of a market which refuses to see the beauty in the stocks I hold. Instead concentrating on the ever so slight flaws in their operations (what’s a profit warning or two between friends?). Of course the flaw of expecting the valuation irrationality (subjective) to suddenly be recognised and rectified due to my participation doesn’t pass me by. Vanitas vanitatum.
Down to business. Last weekend I spent the day sauntering around the UK Investor Show at the QEII conference hall. I can’t help enjoying these events even though I am sometimes left slack-jawed by some of the things I hear. There is much to be learned though, most of it second order. I apologise in advance for the critical nature of this post, my intent was not to pick on one person (MPs don’t count) but to consider the question of impressions using a live example.
It was a beautiful sunny day when we arrived and armed with pastries and coffee, me and my associate The Sheikh, settled into the talk by the Tory MP Sajid Javid. It was doom and gloom scaremongering of the most blah kind. He did redeem himself a touch during the Q&A but I’m not a fan of lowest common denominator politics. Sadly it seems to work. On a general note, on days like these you hear lots of strong views. Holding strong views or talking your own book is one’s right, but perhaps there is a more constructive dialogue to be had if we keep in mind that although our experiences may be real it doesn’t make them true.
Not for Love or Money
We took a short interlude to hear Luke Johnson then we headed to a presentation from a company whose shares I hold. Following the dictum of Warren Buffett to praise by name but criticise by category I’ll leave names out. The presentation itself was a damp squib, the environment far too noisy to hear what was being said and a CEO who presented as if on autopilot. We decided we would go and talk to him afterwards as we both had questions. After lunch (my biennial trip to McDonalds – still terrible, see you in 2017) we went to chat to him.
After some small talk we got down to business, I tried to probe and get a sense of what was what at the company – the narrative is not matched by performance – this is perceived as anl issue with this company. This was the perfect forum for the CEO to disabuse me of my misconception. Anyway we chatted for around 10 minutes where the CEO seemed pretty uninterested, we might as well have been talking about the type of wood for his coffin. He would answer a question with little engagement, clarity or any impression of wanting to present the case for his company.
My thought throughout was why bother attending if you’re not going to bother? Perhaps this is just his manner. To be fair this is a man who has built a very successful company in a tough industry. As a minnow he managed sell the product to large companies, which as anyone who has tried knows is extremely tough.I don’t want to discount him. The Sheikh, had a less charitable opinion of the interaction. For all he knows I could have been holding 2.99% of the shares.
I’ve written before on the importance of management qualities beyond competence, but what aspects are important? Clarity, straightforwardness and aligned interests I would say. I didn’t get any of these from the interaction and that reflects the feel from the reports the company puts out (although to be fair I have become harsh on the content of management reports). Companies, such as this one, that claim short term pressures while claiming medium prospects are excellent leave me with clenched fists. It is like the ‘adverse weather conditions’ get out clause.Fool me once shame on you, fool me twice shame on me.
Post-interview I’ve been asking myself what judgment one can take from these interactions? I was a little leery on the direction of the company before this encounter, what ‘useable’ and ‘robust’ information have I gleaned from the encounter? On this I am not sure. Having some small understanding of the manner in which the mind structures information there is the ever present danger of misplaced inferences. I, therefore, try and create balance by shifting the view. This is a continual and uncomfortable process but fruitful (in the medium term of course). Without it we may end up cementing false judgments through selective memory – fine until the wheels stop turning at which point we have problems. The downside is you have to hold variant views in your mind which makes decisive action taking rather uncomfortable (perhaps …., what if …. etc etc.) .
Earlier in the year I had a conversation with an investor who visits and talks to many companies – he told me something that stuck in my (slightly wine-addled) mind. Meeting companies once is ok but meeting them many times is worth a lot. See someone once and you create an anchor (which is prone to confounding factors). Meet them again and you have another observation point. He gave the example of a company he used to meet where the CEO was dour and cautious in his speech even when they were doing well. One time while visiting, the CEO used slightly more emotive language, ever so slightly. Coming from someone else it would be meaningless, but from the mouth of this particular guy it was a clarion call. I like that, but of course there is great skill in this – good listening is under practiced.
Back to my CEO. This stock was on borrowed time and this interaction just sharpens the claws. There is much to like about the company but my active dictum is “show, don’t tell!”.
So Mr CEO either do more showing or align your telling (please).
The first rule of Dodgeball …
Taking a step back, this mirrors a wider feeling. For the most part I’m lukewarm on too many of my holdings. There is naturally the effect of the too consistent flow of bad news stinking my portfolio, but even in my better performing issues the story vs the valuation is mostly unappealing.
My job is to find the unpopular kid with unrecognised talents; but my judgment on these kids has been so off – it is like Dodgeball without the redemption (or cuddliness). Maybe my meh is just an outward reflection of my feelings on my skills.
There it is, a fun Saturday in Westminster. On a positive note I did pick up enough pens to last a year and some of those squishy balls that you squeeze to release the tension. In tough times you got to take the good where you find it.
Peace and best wishes to you all.