Friday, May 28, 2010

Info You Can't Get Anywhere Else

Investors who restrict their research of companies to text-based sources are missing out. While company conference calls can contain a lot of redundant and irrelevant data, there are often gems of useful info found on these calls that cannot be found anywhere else.

Yes, they can be quite boring. Many managers will start the call by reading out their entire press release, as if to somehow suggest that shareholders cannot read. And some managers speak at such a "leisurely" pace that they make William Shatner sound like an auctioneer. But it's not all management. For value investors, many of the analyst questions are simply not relevant. Whether an event (e.g. plant closure, new product launch etc.) will have its accounting impact in the 3rd quarter or the 4th quarter of 2016 is of no importance to us!

But on some calls, the questions that are asked or the insights management gives can result in the shareholder getting a great feel for certain aspects of the company. For example, on Quest Capital's most recent conference call, items that were not in any release were discussed, as a result of very specific questions that were asked. Quest is in the process of monetizing its loan portfolio. Listeners heard the following comments from the company Chairman:

"The cash on our balance sheet is ballooning, quite candidly. The issue is what to do with those ballooning cash reserves. We are cognizant of [having a] book value of $1.85/sh, and a stock price of $1.35/sh, and this discount is unacceptable. Our objective is to look at any and all alternatives to narrow the gap between net book value and market value."

When a caller asked if the company had any plans to buy back more shares, now that Quest's previously announced share repurchases have been completed, management replied that it was only allowed to do one Normal Course Issuer Bid per calendar year. If not for that, management claimed it would be buying back shares right now.

Management went on the say that the board is exploring what's called a Substantial Issuer Bid so that it can purchase more shares without waiting for the end of the year. Dividends were also discussed as a means for distributing cash. (Considering these options, however, I would venture a guess that dividends would not be management's favourite option right now.)

The conference call made it clear that cash is currently flowing in, and that management is exploring some very specific ways of distributing that cash that can result in a significant upward effect on the company's share price. None of this information is available in any press release!

Incidentally, cost-conscious investors can use Skype to listen to conference calls through their computers. Skype even provides touch-tone capabilities using the keyboard number pad, so users can fast-forward and re-wind at will as if they were using a normal phone. Ordinarily, listening to the Quest conference call referred to above would have cost me 15 cents/minute, but through Skype the whole call cost me only 50 cents.

Author has a long position in shares of QCC
Author has no position in Skype or EBAY

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