Time for an IR Program Pivot?
With inflows starting to improve even while sentiment remains bearish, portfolio managers are seeking out the right opportunities for right now.
Current market sentiment tells a bit of a mixed story. We interviewed portfolio managers and analysts to take the pulse and learned that, while opinions vary, the outlook for the remainder of the year mostly tilts bearish. That said, Morningstar reports that US mutual funds and exchange-traded funds experienced two consecutive months of inflows in June and July. While mild compared to historical standards, this represents the most positive trend seen all year.
More importantly, it means portfolio managers have cash they need to deploy.
More importantly, it means portfolio managers have cash they need to deploy. While most managers tell us they will be staying on the sidelines during September—historically the worst month of the year for market returns—they will be ready and willing to buy in the fourth quarter, and are currently seeking out stocks best positioned to perform in a down market.
Is now the time to completely rewrite the company’s investor narrative with a value slant?
Probably not. Too much volatility remains in the market around interest rates, weakness in China and its impact on global markets, oil production cuts, and the potential effects of the upcoming election year to make this a good time for a full-scale messaging overhaul.
Still, companies need to capitalize on the moment.
Portfolio managers are actively kicking the tires of interesting stocks and looking for the right opportunities to invest. Now is the time that investor relations and strategic communications teams need to get out front with messaging tweaked to emphasize the themes resonating the most with increasingly value-conscious investors.
Below are a few strategies to try:
Intentionally go after thematic, value-oriented investors
Get aggressive when it comes to targeting. This can include new investors as well as those that already know the company but haven’t pulled the trigger in the past because of valuation or outlook concerns. With funds that need to be invested despite uncertain times, portfolio managers will be much more receptive to stocks that historically have been considered undervalued, and they will be actively looking for the best bets within each industry.
Companies that fall into this category have an opportunity to reframe the value perception and highlight their potential to perform or even outperform in a tough market. For example, pointing to strength of balance sheet, access to capital, strength of cash flow, and overall consistency in long-term financial flexibility are good messages to emphasize right now, and can help position companies as a good buy. This is especially true for companies that can back up their stories up by sharing a playbook on plans to support long-term profitability, for example by flexing costs, creating efficiencies, or investing in growing parts of the business.
Point out any insulation to global unease
Companies that operate in counter cyclical industries should focus on any inherent immunities to economic distress. For example, healthcare, education, and infrastructure companies often fare well in challenging markets, and many of these businesses are performing enviably right now.
Regardless of industry, any organization with relatively lower exposure to softening Asian markets has a big advantage in the current climate. We see this as a particularly important near-term investment theme, and any company that can speak to it—from a supply chain and/or end market perspective—should make this a key point in their strategic communications.
Focus on future growth triggers
In a down economy, it’s important to introduce longer-term (three- to five-year) themes for investors to consider and factor into their decisions. There’s no need to promise a specific growth range. Instead, paint the picture of how the company has set the stage for growth, highlighting any catalysts for a return to strength.
For example, companies in industries where end market demand may currently be soft can speak to the smart investments they’ve made or the foundation they’ve laid to move quickly once demand returns. Talk about any efforts to diversify the demand stream or expand the industry – for example, strategic acquisitions. Companies with low debt and flexible balance sheets can also speak to how well positioned they are to take advantage of new M&A opportunities that will trigger additional growth.
Make it easy for portfolio managers to learn more
Highlighting these themes doesn’t mean completing rethinking the investor relations or communications strategy. Companies can start with an easily digestible, one-page fact sheet that hits the major points and shows how and where their organizations are best positioned to succeed.
Also consider offering up a 30-minute “get-to-know-you” call with the IR team. This gives investors and portfolio managers a chance to vet the company and decide if it is a good fit for the investment profile without having to commit the time and energy to prepare for a meeting with executive management. They’ll appreciate the opportunity to get more familiar with companies in a lower pressure, more casual setting.
Tell the right long-term value story right now
While investors tell us that they generally do not have high expectations for markets to improve in the short term, their minds are open to buying in the fourth quarter. They have funds they must deploy, and they are actively stock picking right now. This scenario creates a unique call to action for companies. It’s the perfect time to tell a long-term value story and get in front of investors who may be more inclined to consider stocks that can convincingly communicate their growth potential and trajectory over the next several years.
Need help crafting your value story? Connect with our strategic communications experts and investor relations consultants. We can help you highlight the themes that will resonate with stock pickers most in the current investment climate. And we can help develop the communications tools and tactics that will be most successful in reaching investors looking for good buys.