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Asking the right questions in a meeting with a PLC is a skill learnt over time. Listening to the answer is a life skill as we know. The tone of the question is also relevant as a decent question said in a disrespectful manner can be counter-productive to the meeting. A powerful question to ask is ‘why?
At Peterhouse, we meet and listen to many PLCs as we look for investment ideas. The modern PLC is a marketing machine as it promotes its shares, especially at results time, which is twice a year. However trading updates are also common and can be quarterly. Asking questions rather than just listening to the presentation makes the meeting more interesting for all. However you would not be amazed to know the low quality of questions that are made, if any, in a group company lunch. But not from us. How else does one learn?
Photo-Me, passport picture taker who when we met them told us that they were developing a laundry concept is a case in point. The idea was for an open laundrette, sited in a supermarket car park and costing €8 a load with the washing being done while you shop and open 24/7. Think France not Blighty here! The shares have doubled as the concept proved a winner, investors witnessing the cash poured in after cost refinement.
Alan Williams, FD of Greencore stated over a first meeting coffee that its hope was to build a sizeable American division as it built factories and Starbucks signed up. Post the UK horse meat scandal, Greencore got caught up in the food sourcing panic as it makes sandwiches and convenience foods for the majors food suppliers in the UK. It is reckoned 70% of the UK population eat at least one of its products a month. At the time of the horse meat scandal, there was little interest from the sell side. The share price was 150p then, 318p today. I wrote down “STARBUCKS” not sandwiches as the key takeaway in my meeting notes.
Another meeting win was with the CEO of LondonMetric , Andrew Jones claims to spend around 30% of his time doing investor engagement as he educates investors on his PLC, a specialist property company. The big idea of his a few years ago was retail distribution sheds or dark boxes that served the internet shopper which he was a big buyer off. TRITAX floated on the stock market to invest in these assets two years after Andrew’s vision giving publicity to the sector. No sheds have been built post the financial crunch yet internet retailing exploding and here was the opportunity. Rents were going up quickly. Where did Amazons stuff come from after all? Click and collect retailing is currently around 18% of UK retailing, going to 25% by 2020 it is estimated with John Lewis planning for 50% of their revenue being internet related. Andrew Jones was banging the drum for this asset class in 2014 to anyone who would listen when the shares were 110p and I was one of them. The shares are no longer 110p but 160p with 60% of the PLCs assets in distribution if you cared to listen to his vision. The yield shift of a shed was 8% to 5% and the bigger the asset the better.
Being proactive in stock picking with a basic level of engaging like a meeting with a company has its rewards both ways. We kiss lots of PLCs and do try to avoid the black holes. A formal KISS strategy is a useful overlay too and there is nothing more productive than a good tree shaking meeting, getting good answers from questions, keeping things simple, some banter and all followed by some research about the company. The internet is a member of the team as broker research is not as useful as it was! At Peterhouse, we think meeting companies and asking questions has its place in a spreadsheet world. Notes are made in a little red book and number 15 is being filled at present.
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