12. To what extent does research involve regular contact with company management, suppliers, competitors, etc.? What are the objectives of these contacts? What percent of companies are visited before being included in your portfolio?

Whether or not we contact company management regularly depends on the company. Many big companies are so thoroughly followed by Wall Street that there is little we can add by talking to management. We focus on talking to management of those companies that may be overlooked by Wall Street. The smaller the company, the more we want to know the people and the more contact we will have with them, including site visits.

When we talk to management, we tend to ask a few initial questions. “What are your goals for your business? Where on that measure do bonuses start for employees (do people have incentives to achieve those goals)? Is there anyone on Wall Street who understands your business or your industry particularly well?” Knowing someone on Wall Street that does excellent work just saves us time, especially if we can find someone who loves the company and someone that hates it, that way we usually get most of the pertinent facts. We want to know what goals the company has for themselves because we think they are more likely to hit the targets for which they are aiming. It is part of the job we do for our clients to decide if we think those are the right targets.