Sunday, December 14, 2008

Conference Call Etiquette

Every quarter, public companies are required to release their latest financial results. Along with their results, they hold conference calls and accept questions from the public. As we've discussed before, it's important for investors to listen to these calls to understand the challenges the company faces. Usually, analysts ask management about revenue outlooks for various products, margin expectations, overall strategy and other pertinent questions. Sometimes, however, analysts will feel the need to offer some "free" advice to management.

On the most recent conference call for Build-A-Bear (BBW), here's what Mike Smith of Kansas City Capital had to say when prompted for his question:

"Well, one comment first before I ask a question. I would suggest you don’t buy any stock back because people can postpone buying bears for a long time."

His opinion is one which is rampant throughout a finance industry currently gripped with fear. At a time when value investors are buying, stock analysts are against buying back shares at the cheapest prices in over a decade. (Of course, the value of analysts is not so clear when you consider their ratings of Lehman Brothers the day before it went down).

I'm not saying BBW should be buying back stock, but that option should most certainly not be automatically discarded: if management sees a certain level of cash flow that more than covers their fixed obligations, buy backs at cheap prices may very well be in order. Here's what BBW's founder, chairman and CEO had to say on the matter:

"We have to look at it week by week and we do. And I think that if there’s opportunities that present themselves because we can see that the cash is in excess of what we thought would need to operate our business in a normal basis. And we’re also trying to look and forecast into 2009 and how the economic issues will affect us there."

Free advice is worth its price!

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