Tuesday, February 13, 2007

A Fine Art

The week started off with the UBS 2007 Global Healthcare Services Conference. Most who have attended would likely agree, UBS conferences are well orchestrated and provide a valuable forum for both companies and investors. I went to this conference to observe presentations by management of two companies profiled in our new Small Cap SEARCH newsletter- Aceto Corporation (ACET: Nasdaq) and HMS Holdings Corp. (HMSY: Nasdaq). A noontime panel presentation by four hospital administrators, two of whom represent non-profit faith-based groups, also seemed interesting.

The day started out with some excitement with the 8:00 am presentation by Leonard Schwartz, the Chairman, CEO and President of Aceto Corporation. As supplier of active pharmaceutical ingredients, Aceto is not usual included on the Pharma A list. There is little glamour in APIs. However, Schwartz is one-of-a-kind - candid, outspoken and unapologetic for his strategic decisions. Schwartz uses a somewhat in-your-face speaking style to grab attention for himself and his plans to enter the generic drug market with Aceto branded products. Listening to his presentation, an investor could gain a real sense of the Aceto corporate culture as well as its business model and financial performance.

As the day wore on, things seemed to go downhill. As I listened to the various speakers, I was struck by the somewhat perfunctory investment conference presentation: the CFO and/or CEO at the podium, the standard forward looking statement, beautifully appointed PowerPoint slides. Green is favored by energy companies. Electronics manufacturers like primary reds and yellows. This was a health care conference - everything was in pastels.

At one point I looked up and thought I saw the same two men as had appeared earlier in the day before a different set of slides under a different corporate name. Was there some corporate collusion behind the scenes to play tricks on Wall Streeters? I thought I heard laughter in the speaker ready room.

What has happened to the investment presentation? I did not hear anything in any of the presentations that I could not have learned in the comfort of my office by reading SEC filings and looking at corporate web sites. The exception was Mr. Schwartz who managed to convey his management style (tighten your seat belt) and tactical approach (run and punt) - nuances one usually only grasps by a visit to the corporate headquarters or a private meeting.

I blame Regulation Fair Disclosure for the “dumbing-down” of investor presentations. Not that Reg FD is necessarily bad. Clearly there is a need to even the playing field by assigning penalties for selectively disclosing material information. However, I fear that senior officers have used Reg FD as an excuse to keep public presentations at a “30,000 foot level” where there is no risk of violation. The problem is that for professional investors, the contemporary investment conference presentation offers little incremental insight into a company’s business strategy.

Like many investment conferences, the UBS forum provides rooms for group and individual question periods with management. However, like most conference sponsors, the Q&A period is not recorded and not available to the public. Are those the skids marks of Reg FD leaving the side of the road?

Neither the author of the Small Cap Copy web log,
Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein. HMSY and ACET are profiled in the Small Cap SEARCH newsletter published by Crystal Equity Research.

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