20 Questions to Tell How Well You Allure New Information Sources

Have you seen one of the obstacle course TV shows like Ninja Warrior or Spartan Ultimate Team Challenge (or even Wipeout)? Do you think the winners have a strategy before they start the course?  You bet they do.

Now ask yourself, do equity research analysts approach potential information sources with a clear strategy for getting insights?  Unfortunately, I sense too many don’t put much thought into their approach, falling away in the first or second stage of this obstacle course, which causes them to give up and rely almost entirely on company management for guidance.

If analysts sought out information sources with a similar intensity as they do in landing their first job, we would have a lot more insights for portfolio managers

To evaluate your effectiveness in this area, rate each question on a scale from 1 to 5 with “5” as a “strong yes.” (scoring follows the questions):

1. Have you researched the interviewee’s background in advance to better understand WIIFT (what’s in it for them)?
2. Have you prepared questions before the interview (that meet the ICE™ framework)?
3. Do you possess excellent communication skills (clearly understood by others)?
4. Do friends seek you out to hear their concerns because you a good listener (e.g. empathetic, don’t interrupt or interject often)?
5. Are you the first to say “hello” and thank the interviewee for his/her time?
6. Do you start by asking questions to get to know them, in a sincere and genuine manner?
7. Do you show reverence to the person by noting why you reached out to him or her?
8. Do you establish common ground by agreeing with points they make – and avoid having a debate during your first conversation?
9. While speaking with interviewee (or email exchange) do you make an effort to identify or confirm their “WIIFT”?
10. Do you avoid using terms or jargon that may not be understood by the information source?
11. Do you embrace “their ways” by showing interest in something unique to their profession, personal background or geographic region (e.g. eagerly eating their exotic foods or wearing the appropriate attire)?
12. When possible, do you send the interviewee some of your insights in advance of the first meeting/conversation to establish your credibility?
13. Do you proactively explain you will maintain their anonymity?
14. Are you “In the moment” with the person by avoiding distractions such as emails, phone calls, texts, etc?
15. Are you good at ignoring internal distractions such as inattention, self-absorption, misinterpretation and personal biases?
16. Do you use a comforting non-threatening tone, timing, pace and volume that will appeal to the interviewee?
17. Do you convey body language that shows you are interested in the conversation (e.g. good eye contact, posture, facing the other person directly, smiling, energetic, no crossed arms or legs, etc.)?
18. Do you ask the interviewee’s opinion on topics?
19. Do you use these influencing strategies: reciprocation, commitment and consistency, social proof, liking, authority and scarcity (Cialdini’s Weapons of Influence)?
20. At the conclusion of a conversation, do you thank the interviewee for his/her time and ask if there is anything you can do to reciprocate for their help?

If you scored 70 or higher, you’re doing quite well, and if you’re above 85, you’re likely making new industry contacts more than any of your immediate colleagues. Just like with any good obstacle course, there will be temporary setbacks, but by following these best practices, it increases your odds significantly of finding great insights for stock picking.

This Best Practices Bulletin™ targets #1.Generate Informed Insights and #7. Individual Characteristics of GAMMA PI™, within our Pathway to Success Framework.

Let me know if this Best Practices Bulletin™ helps and how I can improve upon this best practice. If you’re interested in exploring this topic further, AnalystSolutions provides equity research training with a specialized workshop to help in the areas above, Generate Differentiated Insights Through Better Discovery, Questioning, and Influencing.

Improve you or your team’s stock picking and communication skills with our equity research analyst training tools, which includes workshops such as the one above, as well as our GAMMA PI™ assessment and one-on-one coaching.  Also, consider ordering the book that inspired the founding of AnalystSolutions and the Best Practices Bulletin: Best Practices for Equity Research Analysts.

Visit our new Resource Center to find more helpful articles, reference cards, and advice towards your growth as an Equity Research Analyst.

©AnalystSolutions LLP All rights reserved. James J. Valentine, CFA is author of Best Practices for Equity Research Analysts, founder of AnalystSolutions and was a top-ranked equity research analyst for ten consecutive years