Cross Border blogs

News: Investors obsess over macro indicators

Investors are increasingly preoccupied with monitoring macro economic data, says a new survey conducted by Corbin Perception Group.

Just under 90 percent of buy-side respondents report a growing focus on economic data, finds the survey, which canvassed the opinions of US buy-side respondents.

From the interviews, the report’s authors conclude that understanding how both macroeconomic and micro economic drivers are affecting companies is currently an all-time-high priority for investors.

‘I am looking at economic data more now; it is a very macro-driven world right now,’ commented one growth generalist. ‘Economic factors are getting more investor attention than a couple of years ago.’

Over 90 percent of investors reveal that interacting with management is an important factor in their investment decisions, with 65 percent noting it as critical.

Investors also cited gloomy conditions in Europe as a reason for caution.

‘The biggest problem is the deficits that are being built up globally,’ one respondent said. ‘There are massive problems in Europe. There are massive problems in Japan, which the world is just starting to recognize.’

The survey also reports that investors are increasingly interested in discussions focused on strategic and operational performance and company differentiation.

‘Company differentiation is important. It varies between industry and sector but the profitability metrics are key differentiators. Growth opportunities in the short term, but more importantly, in the long term, are something we look for.’

By Clare Harrison

Not a pretty picture for Jessops

With quarterly rent payments due for many retailers, Jessops took the unusual step of reassuring investors via an RNS that it could meet its rent payments.

'Jessops continues to have good relationships with its suppliers and landlords and discussions with HSBC are ongoing. Jessops does not normally comment on press speculation but confirms that its rental commitments due this week will be met.'

It says something about how dire circumstances are when retailers are forced into reassuring investors they can keep up with the rent. The approach seemed to work, however: the stock soared from £2.50 ($4) to a high point of £3.60 yesterday despite the fact that Jessops is expected to breach its banking covenants.

Clare Harrison
Deputy international editor

From mega-cap to mid-cap

We may have trouble categorizing Citigroup in our next investor perception study. The bank has fallen stunningly from being a mega-cap to a mid-cap. At its peak in 2006, Citi stock was worth $55.70 per share, for a market cap of $277 bn. Yesterday, closing at $1.02 per share, the bank had a market value of $5.7 bn. If that holds, Citi will have a whole new list of peers, as our survey segregates companies by their market-cap classifications. What’s more, the bank is even potentially in danger of de-listing. Is this really possible?

Anna Snider

North American editor

A refreshing change at BP

BP chair Peter Sutherland uses an unusual euphemism for the process of removing directors and appointing new ones (well at least, I think that's what he means).

Sutherland's chairman's letter states that the oil firm will 'refresh the cadre of non-executive directors through 2009.'

Don't know about you but when I hear the word 'refresh' I get images of a nice cold drink on a warm summer's day or slightly less agreeable images of someone (or something) in dire need of a good clean.

I'm guessing this wasn't Sutherland's intention. Either way, it sounds wonderfully innocuous. What he actually means is that some of the board will be getting the heave-ho. And there was me thinking we'd reached the end of management twaddle...

Clare Harrison
Deputy international editor

The blame game: now it's the investors' turn

As I argued in my leader column in the February Asia-Pacific edition of IR magazine, this year will not be the Year of the Ox, but the year of the scapegoat.

Obviously, it goes without saying that everyone hates bankers now, but who else will be gracing our dartboards this year?

Well, I'm sure a few politicians will be up there. Among others, Alan Greenspan and Gordon Brown have both taken a fair bit of flak for their part in the crisis. And anyone who saw the BBC's boisterous business editor Robert Peston testify at the recent Treasury Select Committee will know that hacks have also come in for a bit of a pasting too.

So who else? Maybe, finally, it is the turn of the investors. After all, perhaps it was their insatiable appetite for increasing returns ad infinitum that led all those bankers to their unhealthy obsession with securitization. It was also investors who encouraged lots of the companies they were investing in to press ahead with heavily leveraged growth strategies with minimal attention paid to due diligence. It's refreshing, then, to hear someone from the buy side holding his hands up.

Donald MacDonald, chair of the Principles for Responsible Investment (PRI) initiative did the responsible thing this week and shouldered some of the blame for the mess the markets are now in (while cleverly attempting to divert the focus back onto ESG issues): 

'As clients and part-owners of the financial institutions at the core of this crisis, institutional investors should accept some shared responsibility for the behaviours that led to the crisis… we must factor into our decisions the full spectrum of environmental, social and corporate governance issues that have an impact on asset values. Institutional investors can make a positive contribution to rebuilding trust and confidence by taking action.'

Clare Harrison
Deputy international editor

Buffett says enough

For many years Berkshire Hathaway's annual meetings have given shareholders the chance to quiz Warren Buffett, the legendary investor, on questions profound and obscure.

Last year’s queries included:

‘How do you maintain your good mental and physical health?’

‘What is the future of mass transit?’

And:

‘Do you believe in Jesus Christ?’

Clearly Buffett relishes the challenge. But even he thinks the 2008 meet lacked a little focus.

‘In recent years, we have received only a handful of questions directly related to Berkshire and its operations. Last year there were practically none,’ writes Buffett in his annual letter to shareholders, released last week.

As a result, Buffett is changing the way Berkshire will handle its Q&A session at this year’s meeting, to be held on May 2 in his native Omaha.

Three journalists have been selected to participate in the Q&A. They are Carol Loomis of Fortune, Becky Quick of CNBC and NYT’s Andrew Sorkin.

Shareholders are encouraged to email their questions to the journalists, who will pick out a dozen or so each that pertain to stuff the firm actually does. 

Then, on the day, Buffett will alternate between questions from the hacks and questions from the floor.

This will ensure at least half are Berkshire-related, while retaining the chance for Buffett and right-hand man Charlie Munger to shoot the breeze on other topics.

In a further change, there will be a draw to select who gets to speak from the floor.

Previously, investors would stampede in when the doors opened at 7.00 am to queue at the microphones.

‘This is not desirable from a safety standpoint, nor do we believe that sprinting ability should be the determinant of who gets to pose questions,’ notes Buffett in his letter.

Tim Human
International correspondent

Dealing in the downturn

Eric Daniels, the embattled CEO of Lloyds Banking Group, has got some explaining to do.

His decision to buy HBOS last year has saddled the newly formed group with £10 bn of losses and the prospect of plenty more to come.

So the announcement of Lloyds' 2008 results this morning gave Daniels the chance to do just that.

Among other things, he said: 'We are buying the business in the down part of the economic cycle, at a significant discount to book value, which increases the chances of value creation.'

Now, statistically, Daniels is on the right track.

A survey by the Boston Consulting Group reports that deals made in a downturn tend to outperform the market over two years, while upmarket acquisitions on average underperform over the same period.

But, given HBOS' massive exposure to the UK housing market, which continues to tank, I'm not sure investors will be reassured.

Tim Human
International correspondent

No prizes for being nice

Mark Merson, the outgoing head of IR at Barclays, and his team have been getting some good press recently.

They got some more today, when Merson and his replacement, Stephen Jones (currently head of corporate debt capital markets at Barclays Capital) dropped in on the sales team at Panmure Gordon for 'a friendly chat', according to a note released by the broker.

'This is probably news in itself given our two years of sell recommendations on Barclays, and it reflects well on Barclays,' wrote Panmure analyst Sandy Chen.

But that’s where the good news ended for Barclays' IR team. 

The note goes on to outline how Merson and Jones went back over Barclays' full-year results, released two weeks ago, to push what they view as the bank's 'attractive' outlook.

Chen couldn't agree, however. He felt the prospect of further losses in the near-term and the possibility of a government bailout took the shine off things distinctly.

The result: another sell note!

Chen concluded: 'In summary, a friendly, open and much-appreciated meeting with Barclays investor relations, but nothing that alters our views on Barclays. Maintain sell.'

Tim Human                                                                                                                           International correspondent

Rio Tinto offers an olive branch

After taking a bit of a battering from some of its long-term shareholders, mining giant Rio Tinto is doing its best to appease its investors.

A story in today's Sydney Morning Herald states that Rio Tinto is close to a deal that would allow institutional shareholders to buy bonds on the same terms as its Chinese shareholder Chinalco.

The news will presumably be welcomed by institutional investors, many of whom felt the firm was getting rather too cosy to Chinalco.

According to the report, Rio Tinto plans to offer the bonds to institutions on the same or similar terms, helping to make its 'preferential' deal with Chinalco more palatable to its stalwart investors.

Rio's sudden bout of generosity might set a precedent for other firms that are unable to bribe their investors with dividends or further equity.

Clare Harrison
Deputy international editor

Investors back in love with Barclays

So after much investor neurosis, everyone has decided what a fine bunch they are at Barclays.

And isn't it fabulous that it didn't have to go cap in hand to the government for cash? Jolly well done!

Congratulations also to former IR Magazine Award winner and head of IR at Barclays, Mark Merson, for his promotion. It's good to hear some people receiving favorable employment news in the current climate.

The FT's jocular market bloggers Paul Murphy and Neil Hume note that Merson is off to work for Bob Diamond, or 'Diamond Bob' as they call him.

'...and before anyone says this is because Barc’s IR department has been a failure during the recent market meltdown.. they are wrong,' blogs Hume.

'Analysts say he did a good job and in any case the new role at Bar Cap and BGI looks to be a promotion.'

See yesterday's Alphaville for more details.

Clare Harrison
Deputy international editor