IR Monitor – 3 April 2024

In this week’s newsletter:

In this week’s newsletter:

• Whether you’re bullish or bearish, AI is here to stay, so why do investors keep underestimating and under forecasting?
• What did the latest meeting of IR’s top professionals mean for the industry? Be proactive, adaptable, creative and transparent… It sounds simple enough.
• Small shareholders loom large in boardroom fight, as Disney’s proxy fight comes to a head.
• Rumours of a dot-com-level frenzy are swirling and IPOs are heating up, but are they a sign of a bubble? Barron’s says no, and they have the stats to prove it.
• Europe is the place to be this quarter as hedge funds place their bets on European stock’s outperformance versus US peers.
• And finally… throw away your notebooks. Highly organised CEOs may not be the best fit for volatile businesses, according to research.

This week’s news

Investors are still underestimating the long-term impact of AI

Edward Stanley of Morgan Stanley talks to the Financial Times about the perennial underestimation by analysts regarding groundbreaking technologies like AI. Amara’s Law humorously reminds us that we consistently underestimate the long-term impact of these technologies, despite our best efforts. Tracking AI’s success remains a challenge, but examples like L’Oréal’s AI-powered app, which allows users to virtually try on make-up, hint at its transformative potential. So, as AI increasingly emerges as one of the decade’s most significant investment themes, Stanley suggests investors should position themselves for long-term gains because “Pessimists sound smart; optimists make money.”

Ten key takeaways from the IR Magazine Think Tank – West Coast 2024

Last Wednesday IR Magazine’s latest “Think Tank – West Coast” conference took place in California, bringing together a range of industry experts, top-rated IROs and members of the investment community to network, discuss, debate, and dissect topical macro issues facing today’s IROs. Key takeaways included the importance of refining investor messaging, and collecting investor feedback, as well as the ever-increasing need to embrace innovative and data-led strategies, in particular through virtual engagement. The significance of engaging with retail investors and the different ways of doing it, as well as the increasing need to engage with bearish analysts also was a key areas of discussion. 

For Disney, small shareholders loom large in boardroom fight

Many retail shareholders, like Gavin Doyle who first bought Disney stock with his allowance in 2009 at age 11, now finds themselves caught in Disney’s intense proxy battle, according to the New York Times. With up to 40 percent of Disney shares held by retail investors, individuals could sway the outcome, resulting in an atypical situation compared to the usual mutual funds and index funds that often run the show. Whilst Disney’s CEO and Board vigorously defended against activist investor Nelson Peltz’s campaign, spending millions to court small shareholders, Peltz Hedge funds are now the most exposed they have ever been to European stocks relative to a global benchmark, according to Bloomberg. Data provided by Goldman Sachs shows that hedge funds’ allocation to Europe versus the MSCI All-Country World Index reached 5.8% overweight last week, the highest level on record. As a result, investors are now hedging their bets that Europe will drive the next leg of the global equity rally. Multiple funds and investment houses seem to be pointing in one direction: Europe is the new place to be.that the battle is likely to come to a head at Disney’s shareholder meeting today (Wed 03 April). As both sides vie for the crucial support of individual investors, every vote will count in this high-profile contest.

IPOs are back – What do they say about the stock market ‘bubble’?

The recent flux of IPOs in the US is just one more sign that capital markets are starting to bounce back after a challenging few years, according to Barron’s. The University of Florida’s Warrington College of Business found that there were just 38 IPOs in 2022 and 54 in 2023, the fewest since 2008. Investors look to falling interest rates and a broadening market rally as signs of a new dawn. And the numbers have followed, with already 30 IPOs in 2024. However, we are nowhere near the eye-watering 476 IPOs we saw in 1999, so for now, we can just call it a healthy and happy market.

Hedge Funds bet on Europe in hunt for next leg of stock rally

Hedge funds are now the most exposed they have ever been to European stocks relative to a global benchmark, according to Bloomberg. Data provided by Goldman Sachs shows that hedge funds’ allocation to Europe versus the MSCI All-Country World Index reached 5.8% overweight last week, the highest level on record. As a result, investors are now hedging their bets that Europe will drive the next leg of the global equity rally. Multiple funds and investment houses seem to be pointing in one direction: Europe is the new place to be.

And finally… Highly organised CEOs may not be the best fit for volatile businesses

CEOs who prioritise planning and organisation can find their skills make them a hinderance to their organisations when it comes to adapting to external changes, according to new research by Durham University Business School. This is because organised CEOs tend to be more set in their ways, making it more difficult to stomach change and thus limits the flexibility of the business. The researchers measured the personality traits of CEOs using transcripts of speeches made in the Q&A sessions of quarterly earnings conference calls, as these are more indicative of ‘true personality’ and not scripted by PR. Doh! 

To be added to the distribution list for the IR Monitor, or for further information on the dedicated investor relations team at FTI Consulting, please contact [email protected].