Ole Søeberg of Advice Capital talks big data, AI and good IR
Ole Søeberg has worked on all sides of the fence: though he is currently a board member and advisor for Advice Capital’s Vision Fund – as well as serving as chairman of the Danish Shareholders Association – Søeberg also spent time as a fund manager, some 15 years as an analyst and more than a decade in IR: at Tryg Insurance and TDC Group.
Søeberg will be talking technology – specifically the impact of artificial intelligence (AI) and alternative data on IR – at the IR Magazine Global Forum & Awards, which is taking place this year in Paris over two days on Wednesday, October 2 and Thursday, October 3. As well as tech developments, the two-day forum covers everything from building your brand to better target investors, IR under a more direct model of engagement and incorporating ETFs into your IR strategy – and much more.
Big data and AI is being increasingly used by the buy side. Can you tell me more about the sort of data being used and how this is giving investors an edge?
Investors are always on the outlook for alpha creation and data is the obvious source for that.
It started with price, volume, correlations data to do pattern recognition in 1990s, moving onto valuation, consensus and changes in performance. In the 2000s more fundamental data was added: expert networks, consumer and store surveys, web page scraping and search trends before going further in the 2010s to use credit card transaction data, sentiment data and geolocation data such as shipping and logistics center data from satellites, for example.
In 2020s we’re going to see lots of data from the Internet of Things, even more coming from search trends, web scraping, news flow analysis, text and conference call mining.
The use of AI is still in the early stages, but is expected to grow significantly, resulting in a major transformation in how companies are assessed – and how performance is updated.
What advice would you offer IROs around getting to grips with this changing data landscape?
All this data changes the relationship in many respects. The traditional flow of information from quarterly and annual performance will continue and corporates will meet with investors, but the investor you sit in front of will likely have a group of data researchers support them in the future: data scientists, AI experts and other computer science people – these are not the ones you want to send the CEO or CFO to meet. You can also expect the conversation to be taped or videoed for data analysis.
Keep your eyes open to what’s going on. From my time as IRO I realized that internal corporate life has a tendency to think of itself as the epicenter of the world, which is natural given the workload that goes into the company. But let IR be the pathfinder for what’s going on in the marketplace – both in terms of stock market news, but also competitors and other factors that can impact the business performance and assessment.
Does this information affect the importance of corporate reporting in any way? How should IROs take this additional data into consideration when compiling quarterly and annual reports?
Corporate reporting should obviously comply with regulation and aim for best practice standards – as is the case today.
However, keep an eye open for additional information that investors and sell-side analysts ask about. Get their reports if possible and if you see that there’s more information available externally, why not take ownership and have IR be the one delivering that information? Lots of industries deliver monthly data such as automotive sales, airlines statistics and lending data from national statistical bureaus.
As an IRO, you should talk to investors and ask them what metrics and sources they use to evaluate the key drivers for you business.
You’ve said that if used correctly, an investor can probably detect performance variations before even the corporate. What should companies be doing to close this gap or to better understand their own data?
I’ve noticed a few cases where investors and the sell-side seem to be ahead of the corporate updates. A certain sell-side firm has market information on Pandora, the Danish affordable jewelry company, weeks before the company releases numbers. This is not always correct but given more time to do data analysis the accuracy will likely improve.
Another observation is the profit warnings we have seen this summer. In many cases stock price reactions have been muted because it was not a surprise – it was already factored into the stock price. This could be because IR communicated well, but it could also be because investors were assessing the available data and saw the impact of volume and price on sales and earnings several weeks before the corporate suite had the full overview and released their own revised performance and guidance metrics.
Finally, what does good IR look like to you? What would you like to see more of when it comes to reporting for example and are there any examples of particularly good reporting or use of data that you can share with us?
In my view good IR provides an easy-to-understand equity story and with a transparent business model. Revenues are made up of volumes and prices, so give the key drivers on those data points and the same for cost and capex components, which lead into the capital requirements to run the business and how cash flow (if any) will be used.
A few things that help investors a lot is giving data on the total market, the longer-term dynamics and the size of the market and how competition and disruption can impact performance.
The excuse that We don’t disclose that due to competition doesn’t fly. First, there are always employees going to a competitor – so information will be flowing – and in the new data-centric world the information on prices and volume can easily be scraped from the web.
I like the IR updates from Microsoft, Carlsberg and several of the Nordic financials. Microsoft is a huge organization but relatively easy to get an idea of the direction and pace. There’s a lot of regulatory compliance, but it offers a simple overview or appetizer and the investment update work is made relatively easy.
Unfortunately, there are a lot of companies that require one or two hours of work before it’s clear what is really going on: in the pdf document for example, I often count the word ‘adjusted’ more than 50 times in a 30-page update.
So my advice is this: provide lots of data on your web page. The data on Bloomberg and others is often adjusted into their own format, which is not always correct, so I always use the source information.
To find out more about the upcoming IR Magazine Global Forum & Awards, taking place on October 2-3 in Paris, please click here.