SPEAKING TO THE MANAGEMENT - GOOD OR BAD?

Is talking to the BoD a double edged sword?

I was having a chat to a workmate the other day about shares and mentioned a stock i was interested in, saying i had a phonecall with the CEO. He'd actually offered to meet me (more to follow on this folks). My workmate felt this is has the potential induce all sorts of bias in my investment decision and should probably be avoided. Having a think about this there is merits to both cases

Avoid!

By the time you get round to chatting to the bod you are quite far down an investment decision. You are far more likely to have confirmation bias. Any good CEO will be a good sellar of his business and will sell you on their story, only mention the upside and have you doing similar. The market is full of stories. It seems WSG shareholders were sold a story for a long time, Lenigas continually sells his upside story. You should be able to make your investment decsion on the information available to you via RNS and fundamential/technical analysis. If you cant then the stock should be avoided in any case.

Must do!

A CEO/Chairman can give you extra insight into the company. They can explain in non-RNS speak what the company does, where it is going, what the management expectations are. You may be able to gleam titbits of information or they may be able to point you to public info them for whatever reason the maket has overlooked.

My view

These days i find it an essential part of my DD to speak to the CEO/Chairman, at least via email if not on the phone. As i live way over here in belfast, it is hard to meet people face to face. That said, in my day job i have a healthy amount of cynicism when any patient tells me anything so i need to translate that into my investing life. I agree with my workmate, for larger companies you should be able to invest on what is out there in the public domain and balance sheets but for smaller companies that risk-reward is probably in favour of hearing the story first hand but alway question and look for the negatives, not look for the positives. Its safer to have confirmation bias to not buy than to buy.