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The barely coherent ramblings of analysts on earnings calls

Why do they do it? Why can’t they just speak normally?

Why do they have to use buzzwords like “give me some color on that”?

I’m amazed the management is able to comprehend some of the things these analysts say. It’s not that the concepts are difficult to understand – just they word it in such an incomprehensible way.

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‘give me some color on that’ sounds a lot better than ‘why is this doing so sh*tty’ when you’re asking the C class execs of a company :)

“Your beliefs become your thoughts,
Your thoughts become your words,
Your words become your actions,
Your actions become your habits,
Your habits become your values,
Your values become your destiny.” - Gandhi

It becomes impossible not to be like that after you have been an analyst for a while. Impossible.

its just the language of the industry…..you’ll get use to it…..

It’s not as bad as diplomat-speak. 

You want a quote?  Haven’t I written enough already???

in my opinion, analyst rarely ask the tough questions during a call…..they usually save that for private meetings with mgt and buyside guys….

FrankArabia wrote:

in my opinion, analyst rarely ask the tough questions during a call…..they usually save that for private meetings with mgt and buyside guys….

True story. For most companies, the call is a kind of public relations event. They don’t want to talk about anything their competitors can listen in to.

FrankArabia wrote:

in my opinion, analyst rarely ask the tough questions during a call…..they usually save that for private meetings with mgt and buyside guys….

This times a bajillion.  Earnings call is mostly for hearing the results, but my ‘good questions’ will probably not be asked by hitting #3 and waiting my turn; we’ll schedule a private call later that day or week.

Well, how can you justify those inflated salaries without throwing a few buzzwords in? 

NO EXCUSES

Well, he’s a guy on the buy side who happens to run his own hedge fund. I think they have a little bit more leeway (e.g,. not severing potential undwerwriting relationships down the road). 

NO EXCUSES

from what i heard, Einhorn was asking some very very basic questions anyways…….its more like “einhorn asks something!!”…

FrankArabia wrote:

from what i heard, Einhorn was asking some very very basic questions anyways…….its more like “einhorn asks something!!”…

Yes, it was a non-event. People overreacted because it’s David Einhorn.

sounds sexual to me……..

From the Devon Q2 call from http://seekingalpha.com/article/771211-devon-energy-management-discusses...

Bob Brackett - Sanford C. Bernstein &amp; Co., LLC., Research Division<strong> wrote:

Okay, so it’s the geology. Another question I had, can you update us on the offshore cash? I mean, you’ve talked about it before. And also, would you have any appetite to look at international shales, outside of North America, given you’ve got a war chest outside of the U.S.?

Why “appetite”? Why “war chest”?

How about just saying “interest” or “a lot of money” like a normal person?

From the same transcript:

Brian Lively - Tudor, Pickering, Holt &amp; Co. Securities, Inc., Research Division<strong> wrote:

Okay. And then just more strategically, if we’re trying to look at 2013 from a high level given the commentary around NGL expectations from a pricing perspective and some of the results from some of the newer exploration areas, should we, one, assume that spending will be within cash flows net of deal proceeds? And with that, would we expect just more – incrementally more capital allocation to the MF Line [ph] into the Permian and away from plays like the Barnett and Cana, and perhaps the Utica, Michigan area?

This looks like something you’d see in a GMAT prep book, showing what bad writing looks like. Granted, this is what someone is saying out loud, but it is still terrible. Many analysts talk like this and the managements are rarely that bad.

Just curious, but what is your background? Have you ever worked at a large corporation before? Many people speak like this. When I first got into consulting, I thought it was consultant lingo. Then I learned i-bankers use the same words as well as equity analysts. 

NO EXCUSES

Nobody says a lot of money. That is a noobish term. At best you would say “a lot of capital” or “a lot of cash.” But realistically, war chest = pro term. I fully support the use of the phrase “war chest” and plan to start using it as often as possible now.

My name is not Bob Brackett btw.

Management is not bad because they read prepared scripts that have been vetted by attorneys.

nothing wrong with that ingo….

It’s just the language of the profession. If you hear fund manager calls they all sound like that.

OTOH I plan on talking like CFAvMBA when I become a fund manager.

I would say that the phrase ‘war chest’ can only mean 1 thing; the analyst is talking about the majority of the firm’s money and it is a lot of money. If you just say ‘a lot of money’, that doesn’t really mean anything, the firm could have a lot of money sitting anywhere.

The word ‘apettite’ is one I use in most of my papers. The word ‘interest’ could be construed in a way that means the firm wants to move into that sector.

This lingo is perfrectly normal, very common and also ensures accuracy in speech.

plumber > stripper > experience > CFA > MBA

I think of “war chest” as not just a ton of cash, but money set aside for strategic purposes, generally acquisitions.  It wouldn’t sound quite right saying something like “we’re opening up the ol’ war chest to fund share repurchases!”  

Why can’t companies deficit spend for their war effort.  Just like the USG.

You want a quote?  Haven’t I written enough already???

I find the tone quite submissive, like management is doing a big favor to them. The language is warped for sure. I doubt if some fellow analysts themselves understand one another. But i do know very senior analysts who are just plain and straightforward. The case above could be an example. 

of course other analysts understand……

you pick it up pretty fast once you’re in the industry…..

bchadwick wrote:

Why can’t companies deficit spend for their war effort.  Just like the USG.

Oh they do, often under similarly false pretenses. High multiple acquisition predicated on synergies funded by debt? Shareholders receive stock wrapped in a crisply folded American flag.

Yes, after I posted that, I thought, “well, actually companies do float a lot of debt to engage in strategic operations like acquisitions.”

You want a quote?  Haven’t I written enough already???

when i see the amount of money execs make on stock options, its incredible….its literally printing money out of thin air because investors don’t bother to be against such things…..i would argue stock options and stock compensation as a whole should be severely limited…..when a company can just print out stocks and make it worth millions, games start to be played…

FrankArabia wrote:

when i see the amount of money execs make on stock options, its incredible….its literally printing money out of thin air because investors don’t bother to be against such things…..i would argue stock options and stock compensation as a whole should be severely limited…..when a company can just print out stocks and make it worth millions, games start to be played…

It’s a huge turn off when execs try to push “adjusted pro forma” (wait, is that adjusted TWICE?) profit numbers. I’ll stick with GAAP you mugs, your stock comp is coming out of my pocket.

But my favorite metric of all time is EBITDARDCOGS. Why not just add everything back? Sales. That’s what matters. Companies be like, “More sales, less everything else, OHHH YEAH!”

Actually, all joking aside, the longer I do this, the more I am coming around to the fact that equity holders are widely loathed / disrepected and are considered basically the scum of the capital structure. Since the equity is the residual, it seems to be pretty okay for management to lie at every turn, especially if the company is leveraged. If they lie and the company goes tits up, well, that’s okay, the shareholders they lie to get wiped out, but management is never accountable because those shareholders just go away and are replaced by new shareholders when the debt is converted. Basically, the incentives are pretty messed up unless it’s a founder run company and he has significant equity.

I assume everyone is lying to me all the time unless proven otherwise. When dealing with management, that is the only prudent way to be. Even if they are basically good people, their incentive is to lie. Think about what it means when a stock is down a company has cash and can buy the shares – why do they want to tell me good news? It will increase the price of the stock and they will be able to buy less, and that may have an impact on the long-term value of their own holdings if they own stock.

It’s a dirty, dirty game.

The biggest frustration I have with these calls is that most of the questions follow the following pattern:

Analyst:  ramble ramble specific question

Management:  ramble ramble ramble “we’re very happy with results” ramble “we’re optimistic on the future” ramble (question not addressed) OR straight up “we don’t provide that information”

Analyst:  Thanks that’s very helpful.

I’m constantly amazed by the patronizing analyst who thanks the management team for completely avoiding their question.  Granted sometimes the questions are stupid and they ask things that management can’t comment on, but I wish they would follow up and force the question to be answered rather than the smug “that was helpful” reply like they actually got something out of that worthless response.

bromion wrote:

But my favorite metric of all time is EBITDARDCOGS. Why not just add everything back? Sales. That’s what matters. Companies be like, “More sales, less everything else, OHHH YEAH!”

CTRL+H

Find Term=”EBITDARDCOGS”

Replace with=”Bullshit earnings”

Replace all.

That is absurd.  Have you heard a company do that?  I’ve heard EBITDA, which bothers me quite a bit (especially with the capital intensive stuff we usually look at) but never anything past that.  Before R&D?  Before COGS?  Seriously?

Haha no one really does that, but they might say “proforma adjusted EBITDA” – dude, come on, let’s be real, your earnings are nowhere close to the number you just reported. My point is that if you’re going to add everything back, I might as well just look at sales.