We’ve just come out of an earnings period like no other, and now Investor Relations Officers are now faced with a market that’s been completely disrupted by a global pandemic. Leveraging data will be critical to successfully maneuvering the market and continuing to deliver valuable insights to management.
But in a time when more information is available than ever before, the power in that data comes from our ability to discern which are most important and how to put them together to create a roadmap for success. We spoke with Q4’s Head of Surveillance and Capital Markets, Billy Eckert, for guidance on how to best leverage data to help navigate the current market as we come out of our first earnings season impacted by the COVID-19 pandemic.
The advantages and pitfalls of data
Years back, management teams often navigated by “feel,” using only industry prowess to guide their ships. More recently, there’s been a major psychological shift in the way that management teams, analysts and portfolio managers make decisions, largely driven by the breadth and depth of data available to us today.
A team’s ability to drill down into an enormous number of data sets supports more informed decisions based on what the data is presenting. But all this access comes with the challenge of navigating and synthesizing vast amounts of data collected from various sources including market data, company website traffic, earnings calls, webcasts, and other events.
“We find that a little bit of analysis paralysis can result from the sheer number of data points at our disposal,” Billy shares. “This can make it difficult to distinguish the most meaningful factors – those it makes the most sense to drill down on – from potentially superfluous points.”
To maximize the value of data while mitigating these challenges, Billy highlights two best practices. The first is garnering context from management around metrics that are most meaningful, as this deeper understanding can help weaponize these data points later. Second, he suggests finding a partner that shares that understanding and can filter the noise, identify what’s most important and piece data points together into a guide for moving forward.
Putting Q1 data and insights to work
Coming out of this extraordinary earnings season, Billy shares that understanding where your company stands versus its peer group and competitors is critically important.
“Perhaps the most important thing an IRO can do is get a solid view of the industry and understand how you stack up on valuation, price performance and sentiment,” Billy says. “Were your results materially better or worse than competitors? What did your price do compared to peers? What are investors you speak with saying and how does that compare with the sell-side notes coming out on other companies? Is there a clear bias or slant toward one company within the sector or another?”
He stresses that this type of surveillance has never been more important in protecting against activism. He notes that while it’s been quiet at the onset of the pandemic, activists will certainly start ramping up in the coming months to capitalize on this rare and very big valuation opportunity in the market.
As we see the market start to come back from March lows, companies who haven’t experienced that same rebound, who reported earnings and are still down 20% or 30% and underperforming their peer group, will certainly need to increase their focus on activists. Activists will be looking for underperformers with a negative bias against them, as it provides an opportunity to take a substantial position. Using a surveillance program provides an IRO with a pulse on potential activists and a warning when there is something to worry about in this market climate.
“Having that foresight into what can potentially happen and being proactive about partnering with someone who can provide insights for preparing management, PR, the BOD, and outside advisors is the most effective way to protect against an activist attack, Billy shares. “Without surveillance or the ability to have better foresight into the situation, an IRO won’t even know these proactive steps are even necessary – until it’s too late.”
Data coming out of this earnings season can also help inform timing and messaging for more proactive IR efforts, like going back on the road (digitally, of course) to start to drive prospective investors. The industry has done an impressive job of adapting to the virtual NDRs and by weaving together robust and diverse intelligence sources, IR teams can not only have a more complete view of their stock but a better understanding of which investors are most likely to be compelled by their story.
A critical component of a complete ecosystem
While key data points each illustrate an important piece of the story, insights gained through surveillance become even more valuable when integrated into a broader program with a holistic view of the IR function. Accessing the data is an important first step, but the support of advisors and experts in making these insights actionable is an equally important component.
Register for our upcoming webinar with IR Magazine to learn how leveraging the right technology and experts can provide valuable insights on the market and your investors.