Angelo Mozilo, founder and CEO/ chairman of Countrywide Financial, one of the largest mortgage lenders in the US, tends to do most things con brio, including IR. ‘[Investor relations] is our window and, in fact, our lifeline to investors, whether they be institutions or individuals,’ he declares. ‘IR must not only inform but, just as importantly, also educate the investment community as to our performance, plans and vision for the future of our company.’
New York entrepreneur Mozilo started the company in 1969 and moved it promptly to Los Angeles, where it is still headquartered. It has since grown enormously and injected truth into its title, with a genuinely country-wide network and a place in the S&P, Forbes and Fortune 500s.
Countrywide’s corporate innovation flows into its IR. In February it became one of the first companies to dual list on the NYSE and Nasdaq. ‘[It is] something that could potentially provide benefits to shareholders,’ says David Bigelow, managing director of corporate development and IR at Countrywide. ‘We still have a very good relationship with the NYSE and with our specialist – it was just something Nasdaq presented to us as an opportunity. [This pilot program will show whether] the competition improves the liquidity of the stock.’
IR in mind
The company has a distinctive management structure, which has IR in mind. ‘Basically, we bifurcated the typical CFO function,’ explains Lisa Riordan, senior vice president of IR at Countrywide. ‘One senior executive manages all the financials from an internal perspective, and another works with investment bankers and the public, and is out there being the financial spokesperson at conferences and so on. That’s Eric Sieracki, our senior managing director for corporate finance – the IR function reports to him.’
Overseeing the IR function itself is Bigelow, to whom Riordan reports. She has been with Countrywide for two years but is a 15-year veteran of investor relations. Before a stint with a dot.com that went the way of so many dot.coms, Riordan was IRO for a $20 bn NYSE-listed pharmaceutical supplier.
Moving from healthcare to financial services was a leap but one Riordan was ready to make. ‘IROs need the same fundamental skills in any business,’ she says. ‘You need to be able to understand the story, speak the financials, market the story and understand how to package it in a way that’s simple for the investors.’ Riordan is an active National Investor Relations Institute (Niri) member and has also taught IR at the University of California, Irvine.
‘Our investors, like anyone else’s, expect the IR team to be knowledgeable about the company and its financial and strategic plans,’ she explains, ‘and they expect the company to be forthcoming with information in good times and not so good times. Credibility is important.’
Complementing Riordan’s broad IR experience is Bigelow’s deep knowledge of the internal workings of Countrywide. For a little over a decade, he has worked on strategic planning, corporate development and finance at the company, thereby amassing an intimate knowledge of the business, which is appreciated by investors.
The Countrywide IR team is made up of an administrator and three other VP-level professionals, each specializing in one of three areas: retail, buy-side outreach and sell-side outreach. ‘Our main priority is responsiveness,’ says Riordan. ‘If a call comes in we try to get the relationship manager on the line, but the main thing is getting someone on the line who can answer the call first.’ Bigelow adds proudly, ‘We are all well versed in all aspects of the company and very involved with senior management; it’s a very cohesive team.’
Weapons of mass delectation
The universe the Countrywide IR department addresses includes well over 400 institutional investors, around 25 sell-side analysts and about 13 fixed-income analysts. ‘Usually they are bank analysts who also cover Wells Fargo, Bank of America or regional banks and thrifts, or they’re analysts for specialty finance companies, credit card companies or mortgage companies like Fannie Mae or Freddie Mac,’ says Riordan.
‘The company and the industry are not as well understood as we’d like. We have to take the extra time to educate analysts and investors who really don’t know how our finances work or understand the business very much. In fact, we plan to launch a new section of our web site dedicated to tutorials and educational components.’
Most of Countrywide’s investors fit into the value or growth categories and many are focused on the company’s long-term prospects. ‘Although we do have short-term investors in our stock as well, we hope they will be persuaded to stay, as they see beyond the perceived cyclical nature of our industry,’ notes Riordan.
With that in mind, she brandishes the IR weapon of mass delectation: extraordinary results. ‘Last year was a phenomenal one for us,’ she points out. ‘We had diluted earnings per share of $12.47 and our range of guidance for this year is $9-$12, which is down from 2003 but at least twice the 2002 EPS of $4.87. So most of our investors understand the fundamental strength of the company and our long-range growth plans.’
The IR team prides itself on a very high degree of transparency and disclosure, a self-assessment supported by analysts. ‘When there is bad news, even if we’re not involved, our stock can go down,’ says Bigelow. He cites the example of January 28, 2004. Countrywide’s stock was up $5 based on its earnings release the day before, but then Federal Reserve chairman Alan Greenspan made comments that the markets took negatively – and Countrywide plummeted along with the rest of the market. By day’s end, the company’s stock price was up only $0.25. ‘In the end, as a company all we can do is deliver the best results we can,’ Bigelow adds.
Countrywide’s IR team believes in the personal touch with investors. ‘If we see new investors in our stock, we call them and introduce ourselves and make sure they know who their IR contact is,’ says Riordan. ‘Equally, if we see one of our larger investors selling, we call to find out whether it was just profit-taking or had changed its opinion of our company.’
Hands-on
The company’s CEO Mozilo is renowned as the public and vociferous face of the firm. Fortunately, he recognizes IR’s contribution to his company’s success. ‘The role of IR should not be underestimated because without its efforts the accomplishments of Countrywide wouldn’t be widely known, and our shareholders would clearly be under-served,’ he says. ‘I am very grateful for all that our IR team does each and every day to enlighten current and potential shareholders.’
Countrywide holds regular investor forums during which half a dozen top managers are present. About 100 investors and analysts travel to California for these sessions, which are also webcast. ‘Of course we take live questions from the internet so investors on the web can be part of the forum,’ explains Riordan. ‘And then we follow up with a tour of the servicing operation the next day.’
In 2002 Countrywide relaunched its web site and Riordan insisted that rather than use an outside firm, the IR department’s own staff should edit and update information online. ‘We worked with our IT department to design a web site that was very customizable, so we could access and post information,’ she reports. ‘We can add new sections, like corporate governance, if we want, and virtually everything you see in there was typed in by IR staff.’ Both institutional and retail investors use the web site regularly.
Currently, the IR team is targeting more retail holders who now hold about one fifth of the stock. Countrywide is launching a retail campaign this year, part of which involves working with the National Association of Investors Corporation (NAIC) to enlist sell-side brokers with big retail interests. Bigelow cites the long-term approach to investing that retail holders tend to have as the main attraction for building their interest in the stock.
One of the lures for individuals is the company’s dividend, which has increased six times in the last seven quarters. ‘The retail side likes that,’ comments Bigelow, laconically. Until recently US institutions seemed less concerned with dividends but Bigelow thinks it now sends the right message to professional investors about the company’s cash flow. ‘Historically, as our company grew, we tended to use a lot of cash but as we’ve become larger and stronger, we’ve been able to send stronger signals,’ he says.
The IR team is looking overseas as well, where institutions also care about dividends; about 6 percent of Countrywide’s stock is currently held by European institutions. ‘We’ve done some marketing in Europe and some of the high-profile analysts who cover us have European accounts they’d like to bring over here,’ notes Bigelow.
As for further targeting, Bigelow says IR is a never-ending quest. ‘You never reach the point where you can say it’s finished,’ he warns. ‘You’re always looking for the next sale, trying to bring out the more long-term investors and retail investors, and enter new markets. It’s not that we’re trying to achieve a particular mix, more that we are always trying to get new quality investors, wherever they are. And we are sure there are a lot of them out there.’
As he often gets it in company meetings, it seems fitting to give Mozilo the last word here. ‘We have the best IR team in the world,’ he boasts, ‘and that fact is demonstrated every day by the feedback I receive from shareholders who have experienced the performance of our competition.’
What the analysts say
Eric Wasserstrom, UBS
‘On the whole it’s a very, very good IR program. The team tends to be very responsive. There’s a lot of information readily available, all set up on the web site. But Countrywide also does some more complicated things – like disclosures – where it is among the best in the industry, with information available on the web site and easily accessible.
‘Angelo Mozilo does a very good job – he’s a very outspoken fellow, but he is reasonably accessible and comes to New York often. In fact, it’s quite impressive how the company makes the whole management team available at its regular open houses every six to eight weeks, given the size and range of their responsibilities. The whole executive team tends to be available.’
Mike McMahon, Sandler O’Neill
‘Countrywide clearly has one of the premier IR departments in financial services because it takes it very seriously. The IR team is very competent – if team members don’t know something, they quickly talk to the person responsible and come back, and are usually aware of comments management has made at various conferences. I think the most important thing, apart from Countrywide’s accessibility, is its knowledge of the business.
‘The CEO role is very important, and I always like to talk to CEOs, but not necessarily every time I call a company. Angelo is really accessible and seems to be speaking at a conference at least once a month, and then he does a minimum of four earnings calls a year. But a lot of calls go to the IR department because for the most part it is so capable.’
