What kind of questions should a buyside analyst ask management? Can anyone give me examples of the questions they have asked? Thank you.
you should try and track down analyst calls with management. alot of companies will make the transcripts of them available…
those are generally from sellside analysts, and from my experience, have been uninformative. They tend to be responsive to changes in the quarterly statements. What are some good questions to help understand the business? I know these will vary, but what are some of the questions often used?
Well first, if you don’t know, get a run down of all products and how they are reported by segment. Usually, here, is where you’ll find the quarter to quarter change questions (why there was a change and such). What are their market shares in each segment? Who are their competitors in each? How are products sold - by contract? When are the next wave of contracts? Are there any new products coming out that might affect the business? Are there estimates of how many, when? How are their products priced relative to peers? Premium, discount? How much? How often do you raise prices? By what percentage? Have you lost market share due to price increases? What percentage of sales are out of NA? What is available in terms of credit? If there are acquisitions - how much did you pay multiple wise (if private info). When did shares go public? What percentage do insiders own (proxy)? Is there just one class of stock? Is there a controlling share holder? Is the majority of the board independent? Why doesn’t the CEO own any stock? Why are insiders dumping shares? Where are you at capacity wise (depending on industry)? What is backlog - what’s making it up? What are the risks to the business? Pricing, debt, take over, etc? Is there a customer that makes up greater than 5% of sales (any big customers)? To model: Do you plan to buy back stock? Is there an authorization in place? Are you going to be net borrowers or payers - how much? Do you have an option expense estimate for 08? What is cap ex expected to be in 08? Depreciation? Any insight into what receivables/inventory trends look like for this quarter, half, year? Guidance on EPS? Yearly, quarterly? These are very general, and could most all be found in the Qs, Ks, and earnings call transcripts. The questions on a conference call are generally informed questions about the story - which if you’re just sitting down with a company, you probably don’t see that whole picture yet. If you’re getting ready for a meeting, build on this general stuff with pointed questions about movements in financials, the industry, and anything that is interesting/odd in the Qs/Ks.
I think the answer to this is very broad. Depending on the thesis behind investing in the company, the questions will be tailored to gain more color specific to the investment thesis. If you’re looking to buy XYZ because you think their costs will be significantly lower than competitors, you may ask why this could be and why/if it can continue, and what could cause their costs to increase. I think most of the questions will be “common business sense”, in that they aren’t going to be complicated number crunching…that you can do on your own. Also, questions regarding the industry as a whole, it’s outlook, and how management thinks about their industry. You wouldn’t be worried as much about dividend policy, growth, etc. if you are investing because of improving margins. Just my opinnion, but again, I think the answer is it depends. There are some good video interviews with Bill Ackman where he discusses MBI or Target and what he is looking for and watching on Bloomberg, or maybe youtube now.
Thank you for your responses. I especially appreciate all of the specific questions from jpm. I am getting pressured at my new job (equity analyst) to call and ask management questions. I usually search for an answer until I can find it, and have not found any good questions to ask. Thanks again!
lxada269 Wrote: ------------------------------------------------------- > Thank you for your responses. I especially > appreciate all of the specific questions from jpm. > I am getting pressured at my new job (equity > analyst) to call and ask management questions. I > usually search for an answer until I can find it, > and have not found any good questions to ask. > Thanks again! I am (or was) a little like you as well, in this regard. But you have to ask stuff just to satisfy your superiors. If you are a more long-term house, then ask them what they expect to happen to overall industry growth with a 5-10yr view, how will margins and capex requirements develop.
I think the key to good management interviews is to not ask them leading questions. Management is clearly prepared to answer questions like what are your growth prospects, how will you be gaining share, can business X rebound in the next 12 months, etc. All too often, sell-siders and buy-siders alike ask these types of questions on company conference calls when they should actually be asking questions that are much more probing – things that would potentially make an investor question the company’s business model or growth strategy. If you have a good model and a strong gut feeling about the company, don’t feel bad about putting your suspicions out there – remember that management will always discuss their company in their most positive light, so it’s the responsibility of the investor to be skeptical about what they say. Overall, I think jpm351 has proposed some questions that may be useful in an initial phase of investigating a company, but these are very basic questions that assume marginal familiarity with the company. Your questions should be much more probing when you get to the point of considering investing in them.
Some management teams would get pissed if you come in with a bunch of questions as basic as that, not to mention certain adversarial questions. The key is to try and build it into a flowing conversation and not a “let’s hit all the bullet points” Q+A session. Also there’s nothing I hate more than “modeling questions” (IE, could you please tell me your NIM on seg funds in the Asian widget business?). I’m by no means good at interviews, but I AM good at BSing through crap I know nothing about, as I get thrown into a lot of these with zero prep.