I was reminded recently (by Mrs Lupis) of the Rudyard Kipling poem If, which begins: ‘If you can keep your head when all about you are losing theirs’. This poem seems particularly apt during busy reporting seasons and today’s current market conditions.
Fear and uncertainty are gripping world markets, and there are significant macro headwinds blowing in our face. Just like the wind, however, sentiment and markets change – and they do so fast and frequently.
Many investors are holding large cash positions and sitting on the sidelines, waiting for the right entry point. Truth be told, this is very difficult to call and too many people miss the first uptick.
Most fund managers, however, will sacrifice this initial leg-up as they fear poor performance numbers, which in turn make it more difficult to attract new capital to their funds.
Let’s face it: the market can’t go up without more people buying stocks than selling them. So what can you do about that? Your CEO or CFO is probably recommending that you limit conferences and roadshows during periods of extreme uncertainty and volatility, as investors won’t invest in these current markets. This is completely understandable, but I believe it’s a flawed argument.
Analysts and fund managers generally conduct due diligence over weeks or months, and a meeting can often provide them with the information they need to complete models or simply reaffirm their current sentiment. Sometimes they are really just waiting for the right entry point to buy a bargain, and volatile markets can provide these.
For a hedge fund you think is short on your stock, it is more critical in these markets to convince it why its thesis is wrong and it needs to close out its short, which involves buying your stock.
Getting in front of investors in volatile times is, therefore, arguably more important than during normal times. Investors need to hear from you and figure outhow or if you’re affected by the macro environment. It is your chance to assure them your fundamentals are sound and business is progressing. Put yourselves out there and test the demand from investors. Pound the table. If investors are interested, meet with them.
Markets will routinely fluctuate, but your business will still be around. Don’t forget – there are huge cash balances at many mutual funds and hedge funds just waiting for the right entry point to invest. It’s your job to direct them into your company’s stock – and our job to put you in front of the right bargain hunters.
Alex Lupis is director and head of corporate access for Asia-Pacific at HSBC.
This article appeared in the October print edition of IR magazine.
