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Contacting Investor Relation!


Aurelius
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From P. Bevelins book ”A few lessons for investors and managers”:

 

What needs to be reported is data...that helps financially-literate readers answer three key questions: 1) Approximately how much is this company worth? 2) what is the likelihood that it can meet its future obligation? 3) how good a job are its managers doing, given the hands they have been dealt?

 

At Berkshire, full reporting means giving you the information that we wish you to give us if our positions were reversed. 

 

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I'd like to pick your brains regarding contacting IR in a $200 million cap bank where I am a part-owner. It's a bank where I am a long time costumer.

 

A few important things have happened the last 3 years. They have bought an insurance company and parts of two individual banks. In all cases branching out of their home country. They have had a lot of problems with their last purchase which was the healthy parts of a bankrupt bank. Integrating costs were much higher than expected. They are over that hurdle now, but having big problems making money on that acquisition and justifying their purchase price.

 

To return to Buffetts lessons, my issues are I am left wanting more and better information in their annual reports so I can assess the value of the business better.

 

-They reported ROE targets in 2012 which they have subsequently failed on. I would love a more thorough candid discussion on present and future expected ROE's.

-As mentioned they've been acquiring businesses, but they've been short on explaining how shareholders are going to profit from these investments. And they've been too quiet reflecting on these investments after the fact.

-Buy back policies/plans. They have mentioned buying back shares but thus far haven't. Even though the bank has been selling for PB 0.33-0.6 and they've been expecting higher future ROEs.

-Subordinated- and hybrid loans are going to be paid off in the coming years, but they have neglected discussing this in any detail.

 

Other annoyances, but less important issues for understanding future earnings:

-“This year as good as last years” even though 2013 had a worse ROE than 2012 which in turn wasn't great. Money wise the years were similar.

-Didn't address bad core earnings a few years back, but instead highlighted record year as a result of divestment.

 

I am not experienced reading annual reports by any means. But as a part owner I would expect and like proper candid information, so I can make better decisions. I have no experience contacting investor relation. So I thought I should ask this high quality forum for advice.

 

Is there a way you have found especially helpful when contacting IR?

I would be better writing them a letter rather than calling, but maybe it would be beneficial calling them first and introducing myself before I write a letter to them?

 

Any advice?

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Call the CFO and ask...that's what I usually do with micro-caps. Sometimes they are open, other times not so much. If I hit a wall with management I heavily discount that and usually walk away from the investment...it's much more pleasurable to invest alongside good, candid management.

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Guest deepValue

I agree with LC re contacting management directly. However, I wouldn't put too much stock in your impressions of management/how open the CFO is. You have a thesis and you have concerns that could invalidate that thesis. Gather all of the information that can help address those concerns; talking to management is one way to gather data, but it isn't the only way. If you don't make any headway with management, figure out how else you can get the relevant data.

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