The diversity of investment styles and techniques used by investors has never been greater than it is today, spanning everything from long-term buy-and-hold index investors to short-term day traders employing complex technical indicators. However, if there is one common thread among all types of investors, it's that the more information you have, the better off you'll be.

And while news releases, research reports and the latest earnings are all good sources of information, one often overlooked source worth following is the company conference call. In this article, we'll discuss what a conference call is, what information it contains, what the critical components are and where you can find conference calls on the web.

The Nuts and Bolts
During a conference call, investors and analysts can call in over the phone to hear a company's management comment on the financial results of a recently completed quarter. Most public companies hold four calls per year, usually two to five weeks after the completion of a quarter. Conference calls are also known as analyst calls, earnings conference calls and earnings calls. They are usually available online as audio streams for a number of days following the actual call.

Traditionally, calls were only made available to Wall Street analysts and institutional investors. However, thanks to the accessibility of the Internet, more and more companies are allowing individual investors to listen in on the call.

Almost all conference calls follow the same structure. The call begins with the conference's operator, or host, who introduces the management team. This is followed by the company's legal counsel, who states the customary legal disclaimers. Often, the company's lawyer will emphasize that earnings calls almost always involve the discussion of forward-looking projections which, no matter how robust, are still only expectations and are not yet facts.

After the legal disclaimer, management welcomes everyone's comments on the company's performance and future prospects, including the chief executive officer (CEO) or the chief operating officer (COO). General company performance and developments are discussed in this portion, and it is a good idea to listen to this monologue to gain insight into management's mindset.

SEE: Evaluating A Company's Management

The next item of importance is the raw financial data, such as reported and/or projected earnings and revenues. Management typically reports the key financial information, summarizing the company's bottom-line performance and augmenting it with commentary. Much of the information presented in this portion of the call is readily available in press releases.

What to Listen for
Even though conference calls are live events, the discussion from the CEO and CFO at the beginning of the call is mostly a recap of company press releases. Remember that financial statements give a snapshot only of how the company did in the past. The analysis and projections in a conference call tell you how the company is doing currently and how the management expects performance to be in the future. Significant deviations in performance from previous estimates, or material revisions of future estimates, are key details to be concerned with and it's a good idea to listen to management's commentary regarding them. Some analysts and investors believe that by focusing on the tone and the manner in which the message is delivered, further information can be gained about the company and its future.

SEE: Earnings Guidance: The Good, The Bad And Good Riddance?

Once management has presented its summary of the company's recent performance, the floor is opened for questions from the audience. Most analysts and investors agree this is probably the most important part of the entire conference call, as analysts are able to pose questions to management about any area of the company's performance that wasn't clear or that requires elaboration. This is the analysts' chance to put the management team in the hot seat!

As an individual investor, you probably won't get to ask your own personal questions - keep in mind that there are often thousands of people on a conference call and it would be impossible for the management to answer everybody. However, if you listen to all of the analysts' questions, your question will most likely be answered and, more than likely, analysts will ask questions you never considered.

Thus, listening to all the analysts' questions can provide you with great insight into the concerns professional money managers have about the company. Listen to all questions carefully and notice how the company's management responds. The analysts' questions are neither rehearsed, nor submitted before the conference call, so this is your chance to see how candidly and confidently the CEO and company management can back up the company's performance under pressure.

There have been countless cases of a company's management fumbling a question during a conference call, thus causing the stock to be punished in the following days. We recall one particular conference call in which the CEO of a large chip company blamed his company's poor performance on traders who, he claimed, weren't holding on to the stock for long periods of time. According to this CEO, it wasn't poor execution by management, bad inventory control or plunging semiconductor prices - traders were the ones to blame! As you might imagine, the market saw right through this CEO's poor excuse. As a result, the stock dropped 25% the next day, even though the company's earnings met expectations.

More than anything, conference calls can be used to get a gut feel for the company's management. You can read about projected earnings in any financial paper, but numbers on paper can never convey the tone of a CEO's voice. Listen to the mood of the management as well as that of the analysts asking questions. Notice if this mood has changed from past quarters and think about what might have caused a change. The more conference calls you hear, the more you'll develop a good sense of how to distinguish between strong management and weak management.

How Do I Listen?
Almost all companies will post their conference calls schedule on their corporate websites for you to listen to online. Some companies also have publicly-accessible archives dating back a number of years. Alternately, you can find out when companies are holding their calls by visiting any one of the online stock research sites.

The Bottom Line
Next time you listen to a conference call, the key is to distinguish between what is strictly boilerplate conference call speak and what is useful information. The more calls you listen to, the better you will get at deciphering them. Although there is a lot of information in the conference call that can be easily accessed elsewhere, the call can also yield important tidbits of information - especially in the question period - that can help you learn more about a potential investment.

SEE: Putting Management Under The Microscope

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