A Majority of Investors Agree that a Well-Articulated Strategy Helps Them Look Past a Company’s Quarterly Misses
87 Percent Say Non-Financial Information Helps Them Evaluate a Company’s Forward-Looking Guidance
Research Reveals Distinct Roles for C-Suite Executives in Communicating with Investors
Growth and Value Investors Have Different Information Preferences
A new study by Edelman’s Financial Communications group reveals that institutional investors overwhelmingly emphasize the importance of non-financial information as a part of their investment decision-making process, underscoring that it is not just a numbers game.
Edelman’s proprietary “Qualitative Information” (“QI”) survey of more than 150 portfolio managers and buy-side analysts found that more than 85 percent view non-financial information as a critical element in deciding whether to buy and sell specific stocks. Among other results:
- 86 percent said qualitative information assists in validating an existing investment thesis for a particular company or security
- 87 percent said qualitative information helps them evaluate a company’s forward-looking information and guidance
- 84 percent said qualitative information helps them understand and interpret historical results
“Our QI survey underscores that non-financial information, including a company’s investment narrative, plays a substantial role in influencing investment decisions,” said Lex Suvanto, managing director of Edelman’s New York Financial Communication group and head of its global offering. “This research will help the C-Suite better evaluate the role that qualitative information plays in their investor relations program, and the preferences and priorities investors put on different sources of qualitative data.”
Evaluating Forward-Looking Investment Story
Investors and analysts said qualitative information provides essential color for a forward-looking investment story. They said the following non-financial information is “extremely important” in helping to evaluate an investment:
- Anticipated future opportunities and vulnerabilities, such as the pipeline for product releases and new contracts as well as expectations for capital allocation strategy (59 percent)
- Management’s vision for the company (54 percent)
- The depth of management’s talent and bench (52 percent)
Providing Context to the Numbers
“Our QI survey provides powerful validation that investors use a well-crafted investment story to provide context for their models and a basis for valuation, and proves that companies that excel at financial storytelling can often have an edge over their competition,” said Geoffrey Mogilner, senior vice president, Investor Relations, Edelman, who noted that:
- 60 percent of respondents agreed that a well-articulated, forward-looking strategy helps investors better understand and value a company
- More than half (54 percent) agree that if a company can articulate a long-term strategy that meets their investment thesis, investors are willing to look past one or two quarters of earnings misses
Unique Roles for Each Executive in the IR Program
According to the QI study, investors see distinct roles within the C-Suite for delivering different kinds of non-financial information. The CEO is by far the preferred voice for communicating company strategy and future direction (99 percent), current business conditions (74 percent) and the competitive environment (82 percent); while the CFO is preferred for financial disclosures (94 percent) and financial modeling assumptions (86 percent).
When asked to identify the most important factor in a company’s investor relations program, the institutional investors stated a company’s responsiveness to inquiries (71 percent), conducting earnings conference calls (64 percent) and management’s willingness to meet in-person or by phone (57 percent and 53 percent, respectively).
Russell Dubner, president and CEO of Edelman U.S., said, “This new research serves as a complement to the Edelman Trust Barometer and shows there are some specialized audiences – investors – for whom preferences run counter to the general and informed public, namely that the CEO must serve as the driving force in communications.”
Qualitative information is defined as non-quantitative data that can help an analyst or investment professional develop a better understanding of a company’s strategy, competitive position, products, business performance and future developments. It ranges from one-on-one conversations with management and media articles to scripted remarks on conference calls and quotes in earnings press releases. Survey results were released in conjunction with the annual National Investor Relations Institute (NIRI) conference, taking place in Chicago June 15 through June 17, 2015.
Edelman’s “QI” survey, “It’s NOT Only the Numbers: How Institutional Investors Use Non-Quantitative Information” is available here.
About Edelman Financial Communications & Special Situations
Edelman Financial Communications & Special Situations is a boutique strategic consultancy with the reach and resources of the world’s largest public relations firm. We advise public and private companies on strategic and capital markets communications to help position them effectively with the financial community during transformative events as well as during normal-course business.
Clients choose to work with Edelman because of our specialized and experienced financial communications team, our ability to provide the full range of Edelman’s services (such as digital and social media, public affairs and employee engagement) and our ability to access Edelman’s global network of 65 offices around the world. Visit http://www.edelmanfincomms.com for more information.
For more information, contact:
Samantha Nelson
Samantha.Nelson@edelman.com