Results of The Wall Street Journal’s Best on the Street survey are out. After 20 years on the survey scene, they spotlight the 4 C’s that make a great sell-side analyst…contacts, commitment, contrarianism and conviction.
What do we think of this?
From the covered company’s perspective, it’s easy to see how the first two C’s, contacts and commitment, are critical to an analyst’s success. After all, corporate management teams expect the sell-side to have the dedication necessary to fully grasp the company’s mission, vision and strategy while relying on the analysts to connect them with prospective investors.
The latter C’s, contrarianism and conviction, however, are likely a tougher sell. Management teams always covet the analyst that is willing to go against the grain to recommend their company’s stock. But when a rating downgrade or uber-critical position materializes, the knee-jerk reaction is often to chastise the analyst by blacklisting him or her, cutting off all access. In some cases, forever.
Nobody wants to feel the scorn of being in someone’s penalty box, and the same tenet holds true for the sell-side. Instead of seeing a downgrade as a permanent snub and writing off the analyst for good, take the time to understand what drove the analyst’s decision. Use every opportunity possible to demonstrate how your company is executing on its strategy, hopefully dispelling the analyst’s concerns over time.
The analyst may eventually come around and you will have salvaged a relationship that may in fact ultimately prove fruitful.
Stacy Feit is a Senior Vice President at Financial Relations Board with over 10 years of investor relations and Wall Street experience. She provides strategic financial communications counsel and helps clients increase their visibility within the financial community. She has guided numerous clients through major milestones, including IPOs, spin-offs, acquisitions and restructurings.