This is the first of what will be many posts on basic infor­ma­tion gath­er­ing. Gath­er­ing infor­ma­tion is the foun­da­tion of every­thing that a good sell-side ana­lyst does. We’ll cover lots of pieces but with­out con­tin­ual, effec­tive infor­ma­tion gath­er­ing there is no “flow” which is an impor­tant part of being good on the sell-side. The Inter­net and social net­works have added whole new ele­ments to the infor­ma­tion gath­er­ing land­scape but we are going to start first with the most basic which is talk­ing to man­age­ments. A bit of his­tory is in order since the SEC passed a rule gov­ern­ing dis­clo­sure by pub­lic com­pany man­age­ment teams that has had a dra­matic impact on the inter­ac­tion between finan­cial ana­lysts and man­age­ment teams. Before “Reg­u­la­tion Full Dis­clo­sure” or “Reg FD” or sim­ply “FD” for short, ana­lysts got infor­ma­tion from senior man­age­ments that was mate­r­ial to the com­pa­nies they were fol­low­ing but not avail­able to the gen­eral pub­lic. This was cer­tainly unfair and wrong. The spirit behind Reg­u­la­tion FD is to make sure that all mate­r­ial non-public infor­ma­tion is made avail­able to every­one at the same time. For many types of dis­clo­sures, like a change in for­ward guid­ance or a major man­u­fac­tur­ing prob­lem this makes per­fect sense. How­ever FD has not been so sim­ple. Because it’s hard to define exactly what “mate­r­ial” means in an infor­ma­tional con­text most senior man­agers have taken the rule to mean some­thing closer to “don’t divulge any infor­ma­tion of any sort to finan­cial ana­lysts.” Some years ago inter­ac­tions with senior man­age­ments of pub­lic com­pa­nies became so inane and absurd that they ceased to be of any value what­so­ever. The most impor­tant impli­ca­tion is that ana­lysts must cul­ti­vate other sources of infor­ma­tion for the com­pa­nies they fol­low and rely much less on com­pany man­age­ment teams. We’ll go into many lev­els of descrip­tion on these but before going there let’s stay on dis­cus­sions with man­age­ment teams. Although they have become mostly use­less in gath­er­ing infor­ma­tion about their own com­pa­nies, senior man­age­ments, even of pub­lic com­pa­nies, can be very help­ful in gath­er­ing infor­ma­tion on com­pa­nies in adja­cent mar­kets. The first and most obvi­ous thing many start with is ask­ing about com­pe­ti­tion. Although heav­ily biased any spe­cific infor­ma­tion can be help­ful and is often vol­un­teered with alacrity. They key is get­ting specifics rather than “their prod­uct is not com­pet­i­tive.” Find­ing out about a design loss, senior man­age­ment change, or prod­uct delays might be valu­able if con­firmed. More use­ful in our view are the insights offered in cus­tomers, sup­pli­ers and bud­gets. Most CEO’s have free exchanges of infor­ma­tion with these com­pa­nies and while they can be expected to pro­tect con­fi­den­tial infor­ma­tion, they end up with a great deal of non-public infor­ma­tion which can cer­tainly be use­ful and even poten­tially mate­r­ial to an analy­sis. The bet­ter infor­ma­tion is likely to come after some warmup period of infor­ma­tion gath­er­ing on top cus­tomers and sup­pli­ers. In that dis­cus­sion it becomes eas­ier to ask ques­tions about that cus­tomer in terms of how their busi­ness is chang­ing, the same is true in terms of sup­pli­ers by ask­ing about changes in planned spend­ing, chang­ing lead times or other aspects of sup­plier per­for­mance. Although these pieces of infor­ma­tion are likely to be anec­do­tal they can be quite potent in dri­ving inter­est and areas for fur­ther research. It’s not uncom­mon to hear from a com­pany that they are “not buy­ing any more servers from IBM but rather shift­ing to HP due to a more inte­grated man­age­ment approach” or “see­ing a major cus­tomer who is a soft­ware OEM los­ing lots of mar­ket share to a low-end offer­ing from Google.“ Here are the key points: 1. Senior man­age­ment of pub­lic com­pa­nies have a hard time shar­ing any infor­ma­tion about their com­pa­nies or busi­ness with finan­cial ana­lysts thanks in part to fear from Reg FD. 2. The only prac­ti­cal way to gather infor­ma­tion on com­pa­nies is from exter­nal sources or using unique paths (like cus­tomers) to get any­thing directly. 3. Con­ver­sa­tions with man­age­ments can be very pro­duc­tive in terms of gath­er­ing infor­ma­tion about the mar­kets, com­pe­ti­tion, and adja­cent com­pa­nies that are cus­tomers or suppliers.