(All week I had questions about conference calls, so I chose this piece to be able to work in some of the answers to those questions. Many of you wanted to know how you can hear conference calls. That's up to the management of each company. I have long held that given the importance of conference calls, it is vital that they be open to everyone on at least a listen-only basis. Those who want that to happen have to tell the Securities and Exchange Commission to change things. Companies right now do it voluntarily.
Given the changes in technology, I believe all of these calls should be available on the Web. Two years from now I am confident they all will. They are a critical piece of the investing firmament and should belong to all shareholders. I also think the press should be able to be on them, again in a listen-only mode, so reporters can write them up.)
One day some PR firm somewhere is going to give a tutorial on how to give a good conference call.
(This will happen when these calls are open to the public.)
Until then, the conference call will continue to be a haphazard, hit-or-miss exercise.
(There is a simple way to learn how to do a conference call. Listen to a Cisco (CSCO) - Get Report call. Its calls are textbooks of how to be consistent and send the right signals. The president or the chairman, not the PR man or the CFO, should do the call. This is a chance for the top dog to shine, not an opportunity to delegate.)
Given that it's the single most important nonoperating chance a company has to boost its multiple, you would think some of these companies would give a little more thought as to how to handle the task.
(A conference call can be an opportunity to explain a company's mission and goals. It can have a seamless beauty to it, where you emphasize both the strengths and the areas needing improvement. We like calls that talk about a quarter's highlights operationally on a geographic matrix, and then highlight the financials. We want to know what the drivers are. And we are trying to put together a model of what the next quarter may look like. Companies that don't give us that kind of guidance will be peppered with questions that will largely be financial. The financial highlights must include questions about inventory management and days sales outstanding for receivables. Those who don't talk about this stuff will again be the subject of intense scrutiny about it. That can make for an awkward, if not hostile, Q&A, so these companies should explain themselves fully if there is anything embarrassing or wrong that management hopes to skate by. They won't be allowed to. One of the reasons why they won't is because short-sellers can be on conference calls, posing as long holders, and you can bet they will have their voices heard.)
Some of the ones I have been in on during the last two weeks remind me of my stage portrayal of Lt. Rooney in my high school's version of
Arsenic and Old Lace
: wooden, unsure and stuttering. You sure didn't want your folks watching.
(I was a terrible actor, but I did it anyway. I have been on some calls that were so bad that I blasted out of the stock while I was listening to them. None were like that this quarter, and, unfortunately, I did not take the Xerox (XRX) - Get Report call, which I hear went terribly. That's amazing because that is a very seasoned company and I wanted to buy the stock on weakness. But they were so dire they gave you very little hope for a recovery.)
I don't want to blast the bad-call companies here; no percentage in slamming the easily slammed. Instead I want to point toward what the good ones did right.
(Here is where there is a potential conflict between me, the investor, and you, the reader. I can't afford to be bounced from a call or kept off it because I badmouthed some manager on the call in my column. I like to play this game real straight and I have attacked everyone from advertisers to friends in this diary of mine, so I don't play favorites. But if I get cut off from conference calls, I am done for. That's how important they are. I also don't want to make fun of people who did screw up. In fact, the calls that were bad -- and there were some pretty lame ones -- were done by junior people in their organizations, and in every case it showed.)
. Here is a boring old-line industrial company that gave a call that made me feel like I was listening to a company totally in control of its own destiny. The execs talked about goals they had reached, goals they had met and goals they intend to meet. They discussed repeatedly what they were doing for the shareholder. They gave me the feeling that United Tech wouldn't do anything unless it would be good for the stock short- and long-term.
(UTX is making big acquisitions and shareholders have no patience for dilutive ones.)
They also spoke cogently about acquisitions and debt use and how they would be balanced against share buybacks, but that the shareholder was most important.
(Call investor relations at UTX and see if you can hear a play-by-play of this one. It was so to the point and informative that I found myself thinking, gee, despite worries about aerospace and construction, I have to buy this one.)
What made me juiced about United Tech, however, was the confidence. You couldn't tell the difference between the Q&A and the prepared part of the call. Both were so smooth.
(Lucent (LU) went down precisely because the Q&A was disjointed and it wasn't clear why the company was being so cautious. It freaked people out.)
did the same. The managers' cool confidence and on-point message -- including the deft use of examples to show how when Tyco buys a company its margins go up fast -- and their insistence in not straying from core competencies made me feel great as a shareholder.
(Here is a company that continues to dazzle me. The management team here used the call to explain the "Tyco-ization" process of buying companies and then scrapping overhead, downsizing all of the corporate functions that overlap and wringing operating profits from the acquisitions. If you get a takeover bid from Tyco, it is because you aren't running your company very well. That's the only explanation for the unbelievable results these guys bring to each acquired property.)
call did it for my partner,
. Now, of course, PMC has a business that is smoking, so it had a leg up on most companies.
(Conference calls are veritable lovefests when things are great, with a lot of that "congratulations gentlemen for a good quarter" kind of Q&A. Gets pretty revolting at times. I am not asking for Jerry Springer-led conference calls, but guys, have some self-respect and cut the toadying.)
But Jeff was blown away about how PMC positions itself smack in the middle of all the hot areas of telco tech.
(Here is how we are set up. Jeff has primary coverage for all of tech. Matt Jacobs backs him up for all telco tech as well as many of the newer companies that we have owned since the IPOs. I handle pretty much everything else. We have all learned to listen to conference calls and do other things -- although I don't listen to conference calls in one ear and talk to my wife in the other. We are all on Instant Messaging and if we think something is interesting, we tell each other to pick up on a certain line. The proliferation of conference calls means that we often have to listen to a replay. It also means that we hardly have a moment during this period when we can do anything but listen to calls. It is our most hectic time. Most of the time we are just listening for something that has changed, something that is incrementally new from the last time we talked with the company. Often we do it just to learn. I was on a bunch of chemical company conference calls to keep my hand in on pricing as I was on some paper calls. I was on aerospace calls looking for a turn. I was on banking calls to get a state of the economy and listen to bad loan forecasts. Each morning I would decide which calls I wanted to be on and I tried to be on one every hour. So did Jeff and Matt. Jeff listens to them on speaker phone and does other stuff, and sometimes I write articles. We love the ones after the close, but they keep us here late and by Thursday my wife was furious that she barely saw me these last two weeks. I don't think, however, you are doing your job if you own stock and don't listen to the call. That's part of "work." So is talking to others, both holders and analysts, to see if you got the right thing out of the call. Sometimes I just read the notes of Matt or Jeff. But mostly I want to listen myself because I can get a real sense of what is going on. Take the Ingersoll Rand (IR) - Get Report call. The company was on the tape saying rosy things, but when I listened to the call the company was much more downbeat. That saved me money as the stock went up after the headline but then got shelled after the call. That's somewhat typical. It's why it is not a good idea to trade off of headlines. It is also why Jeff felt it was somewhat irresponsible to have any comment about Amazon (AMZN) - Get Report on the site until the call. The call controls, not the headlines, and the headlines are often inaccurate. You have to wait until the call before you can take any big action.)
These three companies must be distinguished from a whole host of very well run companies that delegate the conference call to some automaton who has no sense of what we are looking for and thinks that it doesn't matter much anyway. Or the ones that weren't ready for the obvious Y2K questions. Or the ones that couldn't explain away possible third-quarter summer slowdowns. Geez!! Talk about stuff you should be ready for.
Some of these companies don't realize that there are pools of money all over the country that are on conference call after conference call. We are always searching for new better ideas. We are always trying to cull the old bad ideas. You screw up the conference call these days, we vote with our feet. Sometimes before the call is over. But if you do a good job, we buy.
I had no intention, for example, of being long UTX. I was listening to the call strictly to get a sense of the macro and of aerospace. I came away wanting to buy United Tech.
(Some conference calls are just glorified sales pitches. I was very annoyed at the skit-like way that Amazon conducted its call. I'm tired, I want to go home. I want the facts, not a song-and-dance act. UTX made me want to buy simply by telling the story of enhanced profitability.)
And I did!
(Later in the week UTX continued to climb and I sold it at about 71. I was trying to buy the stock back at 68, but no one hit my bid and I came out empty-handed.)
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Cisco, Lucent and Tyco. His fund often buys and sells securities that are the subject of his columns, both before and after the columns are published, and the positions that his fund takes may change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at