Want to hear the real scoop about your company?

Sure you do. We all do. When we value-oriented Millionaire Zone investors buy stocks, it's as if we are buying the whole company. So management reports to us.

Management tells us -- or should tell us -- what's going on. And we as owners should understand it.

So, as shareholders, do managers in fact really talk to us? Generally speaking, no. Sure, there are press releases and annual reports. But these are documents, and they're assembled by communications specialists, not the managers. So you may have to confront a lot of spin to get the real scoop, if you can get it at all.

But one tool comes closer to putting company management directly in front of you: the conference call. And I don't believe investors use conference calls as much as they should.

Conference calls used to be called analyst calls. Why? Because they were held for the benefit of securities analysts and were attended by few others. But just as the Internet has democratized most of investing, it has made conference calls, or CCs, widely available. Today's full disclosure movement has also helped. The upshot is that now you can listen to almost any CC anytime and anywhere you want.

So what's so great about CCs?

Management can, and usually does, enter the call with a prepared script. But analysts on the call keep them honest. Any issue requiring more attention will typically be teased out by the analysts, right there on the call. The answers to those questions can't be scripted, so you'll often learn the most during analyst questioning.

Click here for the video version of this story from Jennifer Openshaw.

To prepare for this, the better management presentations offer a lot of insightful detail.

Most CCs last about an hour, usually evenly split between presentation and analyst questioning. Financial portals such as Yahoo! Finance carry real-time links at earnings time. Normally you can link through the company's investor relations Web site. The real CC buff can follow thousands of calls through the conference-call portal BestCalls.com.

Here's what I look for in conference calls:
  • Candor and confidence. Does management seem approachable, confident and glib? Or does its tone seem guarded and scripted? What's the mood -- does management seem happy and secure about what's going on, or does it seem to be covering its backside and looking for a rock to hide under?

    Pay attention to language, too. In a recent Lowe's (LOW) quarterly conference call, a 6.7% drop in operating margin was described as a "670 basis point deleveraging." OK, that may be accurate, but it's not exactly presented in an open or clear way. We can't see body language at a CC, but the words can tell a lot.

    Also, is the management team having fun? The CarMax (KMX) management team is known for hosting friendly onsite barbeques for store employees. Do you get this impression from the CC, or again, is management defensive and distant?
  • Business segment breakdown. Conference calls give me a clearer breakdown of the business by segment -- what products are selling, what products aren't. You'll find out more about what's working and what isn't -- and what the company plans to do about it.
  • Market conditions. Many CCs offer tips about market share, share gains and the competitive landscape. You might also hear how your company's downstream channel partners are impacting the business.

    I follow the composite decking industry (see my recent article). Trying to learn more about the business of a major player, Trex ( TWP), I listened to the CC for competitor Advanced Environmental Recycling Technologies ( AERT). From the AERT CC, I picked up that Lowe's, a major channel, is reducing inventory in these lines, explaining recent softness for both AERT and Trex.

    Supply-chain linkages can also be revealing. In a recent Hewlett-Packard ( HPQ) CC, a connection was made between improvement in gross margins and reduced memory-chip pricing. So that tells me something about H-P -- but memory makers also like Micron Technology ( MU). If I'm a Micron investor, I'd be listening in on H-P's, Dell's ( DELL) and other CCs.
  • Production and supply issues. Profits depend, of course, not only on what a company sells but what it makes and how much it costs to make it. During CCs, you'll usually get a clearer understanding of what's happening and changing on the operations side. From the AERT call, for instance, I learned more about the effects of plastics pricing and recycling efficiency on current profitability.

So listen not only to your company's conference calls but also to those of other industry players. You'll learn a lot about the sector, and you'll become a more sophisticated investor in the process.

Jennifer Openshaw, a passionate advocate for helping Americans improve their finances and build their personal fortunes, is CEO of The Millionaire Zone and America Online's personal finance editor. In addition to appearing regularly on TV shows such as "Oprah" and "Good Morning America" and on CNN, Openshaw is host of ABC Radio's "Winning Advice" and serves as an adviser to some of America's top corporations. Her new book, "The Millionaire Zone," will hit bookstores in April 2007.

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