Investor Relations 101

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It’s Time to Revisit What Investors Want: Get Back on Track by Studying These Six Post-Recessionary Attributes the Street Is Looking for Now


By John Lawlor, VP of Corporate Communications, dna13

Nowhere is competition more intense today than in the global securities investment market, particularly for equities, where investors have thousands of public companies to choose from in making investment decisions. Public companies must compete for these investment dollars – they must stand out in a crowded market; they must raise their corporate brand and reputation above the competitive noise.

The primary objective of investor relations is to establish a credible, mutually-beneficial relationship between a public company and the investment community. The objective of IR communications is to deliver timely and accurate information to ensure that the company is well understood by both sides of the Street and thereby build the market’s confidence in the company and ensure that it is fairly valued in the marketplace.

In planning and targeting IR communications, it is critical for the company’s investor relations team and executives to understand—and then communicate and emphasize—the attributes the Street looks for in a company in making investment decisions. The six most important are:

1. Strong brand and reputation. The starting point is a strong corporate brand and reputation. The market looks for companies that are doing everything possible to make every customer a repeat customer. As Warren Buffet once said: "If you lose dollars for the firm by bad decisions, I will be understanding. If you lose reputation for the firm, I will be ruthless."

2. Quality management. Hand-in-hand with a strong corporate brand and reputation is a strong, cohesive management team with years of relevant industry experience and a proven track record of driving consistent execution.

You might think of this as the management team’s brand and reputation, which is mutually complementary to the corporate brand. Just like good PR contributes to good IR, and vice versa, good management brand contributes to good corporate brand, and vice versa.

This critical attribute is best demonstrated in action, rather than spoken to. Biblical terms are appropriate in describing the right approach: "Thou shalt not tout, thou shalt not surprise; thou shalt be credible, thou shalt deliver."

3. Market leadership backed by sustainable competitive advantage—and substantial barriers to entry. The Street is, without a doubt, looking for companies that hold market-leading positions with strong momentum, and for those increasing market share in a large and growing global market. Also critical is having a stronger strategic position than competitors, and being positioned to maintain and strengthen and market leadership, while further distancing the company from competitors.

This attribute is supported by a solid foundation of company-specific strengths, which combined, present a powerful combination. Here is what you must communicate:

• Product excellence—being recognized for designing and producing outstanding products
• Strong focus on the customer
• Innovative, progressive, forward looking
• Agile, flexible, responsive
• Global outlook and presence
• Committed to quality—having high quality, reliable products and service
• Dependable—delivering on what you promise
• Skilled and professional­­—with an employee population that is world class
• Dynamic, competitive, focused
• Forthrightness, integrity
• Solid sales and distribution channels
• Strong, stable R&D team driving market-leading products

4. Strong underlying economics and scalability of the business. The Street is also looking for a solid track record of growth and good prospects for future growth. This includes: operating in a large and healthy, global market—and in industries where it is not notoriously difficult to make money. Significant geographic diversification and a broad, blue-chip customer base are also hot buttons here, as are sustainable profit margins.

5. Financial fortitude and stability—consistent, strong operational and financial performance. This translates to strong revenue and earnings growth history, as well as accelerating revenue and earnings. Healthy and expanding margins are part of this, as is having a strong balance sheet—and being conservatively capitalized, with strong net cash position, return on capital, and free cash flow.

6. Size and agility. Capping off the list of attributes is having sufficient size and strength to compete effectively and, at the same time, having demonstrated agility. Size can help dampen volatility in operational and financial performance and, therefore, in share price performance, as well.

John Lawlor, is the VP of Corporate Communications at dna 13. Prior to joining dna13, John served as VP of Corporate Relations at Cognos and was responsible for a number of key stakeholders, including governments, industry associations, financial analysts and shareholders.