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The value of earnings calls in investment analysis


dabuff
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Absolutely crucial to get an idea about what managements are planning and a feeling of how they communicate with shareholders. Though not earnings calls in a strict sense, taped Malone shareholder events are like Warren Buffett's letters to me.

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I find earnings calls pretty useful. But it isn't really the management guidance that I appreciate. Its the understanding you get of how analysts see the company since earning calls are basically designed for analysts.  The Q&A is always the best part. Also if there are any big issues or problems you will almost certainly hear about them in the earnings call.

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I find earnings calls pretty useful. But it isn't really the management guidance that I appreciate. Its the understanding you get of how analysts see the company since earning calls are basically designed for analysts.  The Q&A is always the best part. Also if there are any big issues or problems you will almost certainly hear about them in the earnings call.

 

Q&A is usually redundant. Half the time I wonder if analysts even pay attention.

 

But earnings call, transcripts, investor meetings, etc. all provide a sense of how management looks at the business, their attitude and like someone mentioned above, what they don't talk about. Do they brush over real issues, or do they talk about them up front and be honest with mistakes?

 

If you know what you are looking for, it shouldn't take long to see if management has a similar outlook or mentality on how to create value. Plus, it's easy to track what they say, and what the results are. These kind of things can provide helpful information on determining how solid management's track record is.

 

My only warning is, don't get caught up in the media/analyst hype or despair over an earnings call.

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listening to these are of high value for me. It normally takes me three conference calls to get a decent read on management (do they walk the talk). As an example, by my third RIM conference call I had no faith in management and exited my full position with a small haircut (and avoided getting scalped).

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Like with most things in life the 80-20 rule perfectly applies. 80% of the calls is complete shit. Of the remaining 20%, 80% of the time in them is completely wasted on robotic readthroughs and "what should I plug into the spreadsheet"-questions from analysts. But the remaining 20% is of value.

 

In the interest of time saving, I recommend skimming transcripts with special attention to Q&A for due diligence and listening only for holdings. If tone of voice or hemming and hawing is important in a buy or pass decision you should have already passed. Cheers.

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