I have been asked many times over where I get some good company information to report to my institutional clients. Well, it can be from anywhere and in the most unlikely places. You just have to recognize it when you see or hear it then figure out why it is useful information for your clients.
For example, I was visiting Qualcomm and some growth stock clients in the San Diego area. One of my clients fortunately was located not too far from “the Q” so I stopped in a restaurant in downtown La Jolla to grab a quick snack. While equity research analysts host lots of group lunches and dinners with clients to discuss stocks and their industry sector in detail, financial analysts never really do get to eat the food because they are too busy talking about their industry and answering questions.
Now back to my story. No sooner had I walked into the restaurant when I recognized a senior executive from Ericsson. Not just any executive that might have arrived from their Dallas office, but one who came all the way from Sweden. His jaw dropped just as I saw the rest of their lunch crowd all staring at me like they just got their hand caught in the honey pot. All around the table breaking bread were very senior executives from Ericsson and Qualcomm.
I said hello, shook hands with everyone and gave them a wry grin followed by a “what’s up?” I forget how they brushed it off as a non-event. My thoughts, however, were “Right. I was born at night but not last night.” The two companies were not exactly fans of each other at the time. After all, Ericsson had slides galore indicating “The Q’s” CDMA technology would at best garner 10% of the worldwide market for wireless communications. In private, they also highlighted that the technology did not scale and in the off chance it became successful, Ericsson would not need to pay Qualcomm royalties. In fact, they were in the middle of a lawsuit.
I knew this meant something. There was a wide range of possibilities. Worst case, Qualcomm and Ericsson were close to settling a lawsuit that served as an overhang on Qualcomm’s stock. Best case, Ericsson may be: capitulating; finally embracing CDMA; and will be paying Qualcomm some hefty royalties in the future. I’m not the type of person to sit on that kind of tidbit so I issued a note to all our clients and personally called the biggest ones.
As a postscript, Qualcomm and Ericsson did reach an agreement and made the announcement about three months after that chance encounter that gave me some good company information on one of the stocks in my coverage list.