Homepage
PR Newswire
10-06-2017, 07:58 AM
(This post was last modified: 10-06-2017, 08:00 AM by bardsmanship.)
For some companies, assessing some aspects of their core business is relatively straightforward. For instance, if I am looking into a real estate developer that builds local condos, I can get a sense of how well a particular launched project is doing by calling up a property agent and posing as a potential buyer.
Or, if it's a restaurant chain like Jumbo, especially if it doesn't have too many outlets yet, I can visit their restaurants during lunch/dinner hours to get a gauge of their sales by seeing how busy the places are, estimate the number of table turns a day by counting the number of customers they serve and so on.
But it is very hard to do this for other companies. A good example is Apple. Not only is the company famously secretive (most employees didn't even know the first iPad was being developed until Steve Jobs unveiled it on stage) - making it impossible to get information from investor relations or even company insiders, their products are also sold in so many territories via so many online and retail outlets that checking out a handful of individual stores or tracking their sales on websites like Amazon or Taobao isn't very helpful. Instead, Apple analysts rely on "channel checks", or interviews with Apple's main contract manufacturers and distributors to get information.
Some short sellers also make use of channel checks to uncover questionable practices (such as inflating revenue) by companies. The short seller newman9 from Value Investors Club, for example, said in his initial report on Sino Grandness:
The million-dollar question is, even if you manage to find the right people to interview, why would they be interested in talking to you? What is the incentive for them to do so? If I were a distributor for a company's products and someone called me out-of-the-blue one day wanting to talk about the sales for a particular product, I imagine I would be quite suspicious of their intentions - they might be a competitor trying to gather competitive intelligence.
But even if I reveal that I am an investor or an analyst, there still doesn't seem to be any reason for these people to take time out to talk to me. I suppose there are a few things I could do:
a) offer some sort of monetary compensation, e.g. a token amount of cash for doing a "survey"
b) treat them to a good meal at a nice restaurant
c) promise to send them my report before it is published, so they get the compiled information (which includes info from other suppliers, distributors etc) before the general public does
d) a combination of the above?
Do any valuebuddies have insights as to what analysts / fund managers do when they conduct channel checks? Very curious as to whether retail investors like ourselves can also perform such channel checks as part of our due diligence.
Or, if it's a restaurant chain like Jumbo, especially if it doesn't have too many outlets yet, I can visit their restaurants during lunch/dinner hours to get a gauge of their sales by seeing how busy the places are, estimate the number of table turns a day by counting the number of customers they serve and so on.
But it is very hard to do this for other companies. A good example is Apple. Not only is the company famously secretive (most employees didn't even know the first iPad was being developed until Steve Jobs unveiled it on stage) - making it impossible to get information from investor relations or even company insiders, their products are also sold in so many territories via so many online and retail outlets that checking out a handful of individual stores or tracking their sales on websites like Amazon or Taobao isn't very helpful. Instead, Apple analysts rely on "channel checks", or interviews with Apple's main contract manufacturers and distributors to get information.
Some short sellers also make use of channel checks to uncover questionable practices (such as inflating revenue) by companies. The short seller newman9 from Value Investors Club, for example, said in his initial report on Sino Grandness:
Quote:Our channel checks, which consisted of speaking with distributors, retailers, former employees, competitors, contract manufacturers, and other sources, uncovered overwhelmingly negative feedback regarding Garden Fresh trends and outlook and cast significant doubt on the reported size of the business. Sales of Garden Fresh products were described as “disappointing,” “not selling well,” and even “shrinking.” Distributors have indicated an interest in terminating their distributorships. The Company is “not well known” and several industry participants we spoke with outright doubted the reported sales level.
The million-dollar question is, even if you manage to find the right people to interview, why would they be interested in talking to you? What is the incentive for them to do so? If I were a distributor for a company's products and someone called me out-of-the-blue one day wanting to talk about the sales for a particular product, I imagine I would be quite suspicious of their intentions - they might be a competitor trying to gather competitive intelligence.
But even if I reveal that I am an investor or an analyst, there still doesn't seem to be any reason for these people to take time out to talk to me. I suppose there are a few things I could do:
a) offer some sort of monetary compensation, e.g. a token amount of cash for doing a "survey"
b) treat them to a good meal at a nice restaurant
c) promise to send them my report before it is published, so they get the compiled information (which includes info from other suppliers, distributors etc) before the general public does
d) a combination of the above?
Do any valuebuddies have insights as to what analysts / fund managers do when they conduct channel checks? Very curious as to whether retail investors like ourselves can also perform such channel checks as part of our due diligence.