How To Destroy An Analyst by POT
by Kaiser EdamameBill Doyle the baller CEO of Potash Corp (NYSE: POT) recently crushed the spirit of an analyst on a conference call in a swift and brutal way that made even all of us here at LoS (who hate bad sell side research) cringe. The unfortunate recipient of this de-pantsing was Charles Naberg who had recently initiated on the fertilizer industry. He asked an innocent enough question about some capacity expansion on the 3Q call and got a terd-filled sock shoved in his mouth as a reply:
Charles: “Hi guys. Nice quarter. Had a quick question on Lanigan. How is that progressing? Is it still on time for the middle of this year — or this coming year, excuse me, middle of 08? And can you remind me about what the size of that addition is going to be?”
Bill Doyle: “Yes Charlie [ed note: he was introduced as “Charles” and the this is the first time they have ever spoken to each other], to answer your question, what I would tell you is that Lanigan is 1.5 million tons. It’s on budget and on time for next year. You know, essentially the big piece there is the mill. So we see that progressing according to plans.
You know, I read your first entree this week into the potash world. First I would say welcome to the fertilizer world and I did have just a couple comments, Charlie, just because I never have a problem with anyone’s call, you make whatever call you want, but some of the factual information in your report was a little bit suspect and I would say the — you know, the comment about Potash Corporation abandoning our discipline and I don’t know what the line was, something about us being out for pizza or doughnuts — it was cute, but if you follow the history of the company, you’ve got the same management team for the last 20 years and if you check back and do a little research on us, you’ll find that we have always matched supply to demand and it’s not how much capacity you have, it’s how you operate that capacity, Charlie. And the other thing I would say is that you know, you referred to Potash mining as being high fixed cost business. Potash mining is not a high fixed cost business. You know, we can lay people off and shut down the operations. We’ve done that for years and years when the time required it.
Unlike our phosphate business, which is a high fixed cost business, because you’ve got to keep that operation hot, so-to-speak. You’ve got sulfuric acid plans, you’ve got to keep your water pumping capability in the mine site. You just really can’t shut that down. So, there is a difference there that we would be happy to try and explain to you in the future.[On] Our earnings being highly dependent on biofuels – three quarters of the new demand growth in our business is food demand. We’ve tried to talk about that at every stage and what I would really suggest to you, I think you know, you covered a little bit on the supply side, you didn’t talk at all about the demand end. And I would say go out, visit
India, pick any five cities, China, any five cities, and you’ll see the demand for food and it’s a very, very real issue. You know, the other comment about consumers banking inventory before the Spring season of 2008, that’s just impossible. Just isn’t inventory out there and everybody is hand to mouth at this time. So I would say you know, overall less than a distinguished effort but the good news is that there is nothing but up side for you for the next go round.
Now we have a website question here that I would like to answer.”
Recommendation: Don’t eff with Bill Doyle and don’t eff with POT.
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Fucking OUCH!
When I was a sell-side analyst (and hating every minute of it), I verified every little detail with the company, their statements, their customers, etc. for accuracy before I initiated coverage or published anything at all. That was pretty standard practice for all the analysts I knew.
Then, if I happened to write or say anything about a company that was less than glowing, I became the target of IR’s enraged phone calls. If, God forbid, I should change the rating to anything lower than “Strong Buy”, I had to listen to endless whining by clients who had large long positions in the stock. After a couple of years of this, large quantities of smart people leave the sell-side and are replaced mostly by dim-witted sycophants fascinated by seeing their names on published reports and whose intellectual opportunity cost is obviously pretty low. Thus, there is nothing for the sell-side to be except bad and annoying.
I will say this, though – if it were me, I would have given it right back to Bill Doyle by laying some hard cold facts on his ass. Nothing makes management (a synonym for “liars”) start stuttering faster than “Really? Because when I checked with so and so, here’s what I found…” Either this punk got his ass handed to him because he’s even suckier than the average sucky sell-sider or because his balls haven’t dropped yet.
I dated a girl once (emphasis on “once”) who I found out was a sell-side analyst. She insisted that it was much more of an interesting job than working on the buy-side (yes, the entire buy-side), and “everyone should start on the sell-side.”
Needless to say, I made her pay for dinner.