Name: Pınar Uğuroğlu
Title: Deputy CIO and Head of Research
Company: BNP Paribas TEB Portföy
City: Istanbul, Turkey
LinkedIn: https://www.linkedin.com/in/pinar-uguroglu-8a906b1

Interview audio:

Interview transcript:

Matt:
It’s “ten till”. OK so we’re recording now.

Pınar:
OK

Matt:
So remember, if we ask for too much confidential information then you won’t hurt our feelings if you just tell us “hey, I can’t tell you the names.”

Pınar:
OK

Matt:
First question: Tell us your name.

Pınar:
Pınar Uğuroğlu, and I work for TEB Portföy.

Matt:
And what do you do there?

Pınar:
I am head of research and fund manager for the international accounts.

Matt:
So think of a company that does something that you like. Tell us what they do and what you like about it.

Pınar:
I am not going to name the names, but a generic company that I like from a investor relations point of view would be a tended company meaning that it openly communicate to you both positives and negatives of the business but also emphasize merits or some points that we may lack or disregard regarding the company and understand the business very well. The value proposition of the company that they are working in, and emphasize or present their way in line with their value proposition. Answer the questions directly, rather than rambling around and not giving you a direct answer. Because at the end of the day were trying to get the specific information.

Matt:
You mentioned the value proposition for the company, is that the marketing value proposition or the investor value proposition? Are there different value propositions?

Pınar:
I think what I mean is that they should understand what is important for the bottom line or the share price. It can be multiple things, for one year it may be important that they are exporting – so their value propositions or their earnings may be driven by their exports for that particular year. Or the company is growing in export markets – that would be much more important going forward. They should emphasize this factor.

For another year, they should emphasize cost control or savings, because that is the way the business is heading to. So that the investor can understand the management or the investor relations – you understand what the business means and really in line with their aim or their strategies directed toward the areas it needs in that particular time period. If the investor gets this conviction meaning that yes the management thinks the right thing and do the right thing, then I can be much more relaxed about my investment because I know that the management really is on top of the things, do understand the business necessities, and do the actions according to that message piece. Otherwise, a generic investor relations presentation that talks about many things can be off the aid. I wouldn’t leave that meeting with a conviction of negative or positive, I would be in a sort of limbo.

Investor relations job is to obviously tell you a candid picture but also try to convince you that the company can do well in a certain time frame or you are in good hands in terms of the management. So you should feel at ease with the management capabilities of the company. So there should be a conviction in process but should not be through marketing as well. That’s why it’s important that the investor relations do understand their business, where they earn money from, what is their current business situation is like, and then direct you toward a more positive picture about that company. A positive aspect of the company.

Matt:
One thing that other analysts have mentioned is the importance of context. Here is the piece of data, here is a number, have an IR person who can tell us how does that piece of data fit into the broader context, the bigger picture. Is that an important thing for you?

Pınar:
I think if you mean comparative analysis – say like, if a company is proud that it is one of the cost leaders. Putting that into perspective really helps, is another add-on to the investor relations effort, I think. It does help for sure. But they have to emphasize it as well. That is what I’m trying to say, sometimes we can make those 50 pages of presentations, comparative cost analysis can be one slide. But unless you are directed to look at that slide, you would not perhaps after the meeting.

Matt:
So that slide gets lost in a mountain of other data?

Pınar:
Yes. So what I am trying say is then what is important at that time period, you should emphasize and put forward. You can say, for the banks let’s say 2016 would be, say, about fee generation and cost control, that’s important. That is how we’re going to earn money in 2016. That’s a CEO public remark guide. So every effort should be based on this. How we earn money off this, how we can improve this, how we stand in terms of the industry, what we are trying to achieve in the next few years, what we mean by cost control. Something like that, right? So your CEO can give you a lead about what is important for that year and your investor relations effort can build on it apart from other things. So these are the two points that they should have, a sort of mental mindset in terms of “I’m not going to leave this meeting without mentioning these two points.” I think that should be the aim of the investigations. Whether or not they ask me, I’m going to mention these two points. Because that is important.

Matt:
OK. Now, think of a company that does something that you don’t like. Think of a company that you would like to strangle. What do they do that you don’t like?

Pınar:
Well, if they don’t return my calls. If they don’t communicate with me at all, I wouldn’t like them. So obviously you have to be in the face of the investors. Presence is a must have. Second, they may be in front of the investors but some investor relations are… I don’t know whether it’s good or bad but I really personally don’t like it. They don’t talk unless you ask.

Matt:
Okay

Pınar:
So you have to ask. You have to do your homework. Either they’re trying to teach you to do your homework …

Matt:
Uh-huh

Pınar:
… So if you’re [inaudible] about the company, if you know nothing about the company you can stare at each other for an entire 2 minutes.

Alper:
No questions, no answers, no communication.

Matt:
Okay.

Pınar:
So that part I don’t particularly like. Because it has to be communication.

Matt:
Okay

Pınar:
Not just questions and not just “yes” and “no.” It should give you an idea then. After that meeting you should have an idea about the investment people.

Matt:
Okay

Pınar:
You can either say “Ah, this meeting was interesting. I’m going to definitely look at my numbers again. Perhaps I’ll buy the stock” or “This meeting was interesting but this year may not be their year. I’ll wait for a while.” That’s a good – You don’t have to buy the stock right after.

Matt:
Uh-huh

Pınar:
The worst thing is that I don’t know what to think about it. I don’t have any time to look at the numbers, I’ll just dismiss it.

Matt:
Okay

Pınar:
It’s in the back burner. That’s the worst thing.

Matt:
Okay

Alper:
I have a general question. The way I see it, sometimes you have to beg for information from the IR department.

Pınar:
Yes.

Alper:
Isn’t this supposed to go the other way around? Aren’t you supposed to be served this information on a silver platter?

Pınar:
I don’t know, first of all, because from a fund size we’re sizable but we’re not the largest one. So if big accounts like Fidelity or Capital who have massive assets on their management. Perhaps they are getting served by the silver platter.

I don’t know, but in our case most of the time brokers do it. So brokers are brokering meaning they fix meetings between you and the company.

Alper:
Okay.

Pınar:
So that’s a broker’s function. It’s easy for the company to, it’s easy for me too, because we have a lot of investments. Not every investor relations person knows them by person. But sometimes whenever they do these annual meetings they’ll serve it at night and use their home turf as well. As we have seen in İş Yatırım or İşbank meeting. But I don’t expect investor relations to call me. I don’t have that expectation. I would like them to answer my calls if I call them.

Matt:
Yeah

Pınar:
I think that’s good enough for me. I don’t have high hopes about – and sometimes you can get annoyed by this. In a sense that if you really don’t think about investing in a company and IR is overly ambitious and trying to call you every day. That can be tricky too. Because you get suspicious that there’s something they are going after.

Either the shareholder would like to sell the stock so they’re trying to sell the stock first to you. Share price goes up and the shareholder over-sells. So you get suspicious. So everything can happen in this market.

Alper:
So it’s a matter of balance.

Pınar:
Yeah

Alper:
Not too much communication and not zero communication. Somewhere in between.

Pınar:
Yeah. Generally I like to see the upper management in the meetings as well. That’s a good meeting. If they bring a CFO or Head of the Business Department or Head of Sales. If they train them in terms of what they should say and what they shouldn’t say to investors it’s important because they shouldn’t leak information that’s not allowed.

Matt:
Okay

Pınar:
But as long as they train them, these non-IR people, they should definitely include them in the meeting. Especially if it’s a high level meeting.

Alper:
Okay so you would prefer that instead of a CEO taking the stage and speaking for an hour?

Pınar:
No, I cannot meet with a CEO in a one on one meeting so my only context of a CEO I’ve known by name, X, I’ve never asked him for a personal appointment because I don’t think that I can get it. Perhaps I can but I never tried. That’s my first contact with him, being in a CEO meeting. So I don’t discourage that but what I’m talking about – if I go to meet at investor relations and if I’m at the very point where I’m really on the verge of making a decision. Or if I’m bringing along something with me, my CEO, my shareholder, then perhaps they should bring another person who can talk about another aspect of [inaudible]. It cannot be just IR, but a team effort in handling the IR relationship. CEO meetings? Sometimes we do have CEO meetings for sure but it’s mostly just general big meetings where you have auditoriums or it’s more like a speech type of event.

Matt:
Before we wrap up, the last question here. Before we go is there anything else that you’d like to mention like an example. Something a company does really well, or something a company does really badly, something you wish they would do differently.

Pınar:
Generally what we like is not just investor relations. It’s more like the company getting managed well. That’s what we like. We like good management, solid business models, and cheap stocks. Cheapness you cannot have an effect on. But at least the management, or the perception of the management, should be communicated well enough. So that you trust the management. Business models should be explained to you in a meaningful way. The management should know their key numbers. They should know their ROE. They should know return as capital. They should know return related numbers.

Matt:
Okay. Return related numbers.

Pınar:
Return related meaning that because I’m investing in the company and I’m expecting a return. That return can come if the company earns a return. So if the company keeps burning money, if the company cannot get any money paid back from the investments obviously my investment to the stock would not be profitable. So the management explains to us that whatever they do is for good business returns. And these are 5 things they do, 5 things they don’t do, how they manage the business, how they manage the balance sheets, and how they manage to shed all of their interests. They should be clear on these very important pillars.

I’m always amazed whenever I go to the US and meet with the US investors, especially during my sell side days, I remember one episode that I was trying to tell this person, he was an investor, he was a very American-type, not looking at emerging markets that much, sort of used to dealing with the American companies, right? He took a meeting and I told him that one particular investor in Turkey has never earned above the cost of capital. It’s on the economic value terms. This is a [inaudible]. For an American, this company should go bust. The shareholders, not just the minority shareholders but the big bosses who own this company should close down the company because there are better ways to use capital.

Matt:
Yeah.

Pınar:
The guy refused to believe me. He refused. “You must be wrong. Check your numbers. They should not constantly earn below the economic cost of capital.” I was right but it was incomprehensible for him. For Turkey, that’s not the … Companies can go on really eating up their capital. Nobody does anything. But you shy away from investments. So they should bear this in mind that an investor would ask for a return. I should know this number. If the return is low, I should be able to explain why it’s low.

Matt:
Okay.

Pınar:
I should be explain how we are about including terms, something like that.

Matt:
Okay. Okay.

Pınar:
I think for the economic building of the society this is essential; the Management thing as a shareholder.

Matt:
Okay.

Pınar:
If they are living in a capitalist society. If the economic model is different, if you are not capitalists then this is something else.

Matt:
Okay, okay. So before I stop the recording, Alper, do you have any other questions?

Alper:
About 26 more questions.

Matt:
We’ll stop the recording though.

Pınar:
Thank you.

Matt:
Okay.

About Matt Krause

Matt began his professional life managing inventory levels for wholesale import companies and forecasting labor costs for national retail chains. Since 2006, he has been teaching professionals how to present themselves and their companies better. His clients work for companies like Citibank, Microsoft, 3M, P&G, and HP.