First up, I loved doing this exercise because thoroughly researching your target audience is such an obvious way of optimising how you can engage with the market. It’s the ins and outs of our day-to-day that usually get in the way, which is why I love doing them at offsites.
I’d strongly recommend doing an exercise like this, researching the investor personas who invest in your company. We do this as a whole company of 30 people twice a year (Feb and July) and it’s a great activity that aligns the company strategically and sets the focus for the next six months.
We analysed four different investor personas
Momentum retail investors
They’re the ones looking to build and benefit from share price momentum and shifts in focus, a common technical strategy for many retail investors. Think of lithium, BNPL, etc
Value retail investors
They’re a little more advanced than momentum investors, and look for the next company to believe in longer-term, where they see value before others.
High net-worth investors
They are what it says on the box. They’re individuals with significant amounts of capital to invest - but typically still investing on the side, after hours from their day job
Institutional investors (instos)
We all know this mob. They are the pros, investing someone else’s money and only earning on out-performance.
Did you know that the collective retail investor group makes up 26% of trading volume on the ASX, up from 19% in 2020? For ex-ASX200 companies, though, this can get as high as 76%.
We broke them down into three personas, momentum, value and high net worths.
Momentum investing is a popular approach for new investors which involves capitalising on short-term market trends. Recent examples include surges in AI and prior to that, lithium.
These investors use technical analysis and monitor news and financial reports, instead of relying solely on social media or forums, to identify early-momentum opportunities. They focus more on the code than the company, and they’re largely transactional.
Momentum retail investors have been empowered by modern technology to use market data and transparency to inform their strategy of identifying and investing in early-momentum stocks and thematics.
How to attract buy orders from momentum value investors
Newsflow is your best bet for momentum investors. High newsflow = high velocity, which is how we build momentum!
Make news that is easy for them to digest. Adding videos and summaries to your announcements is a great way to build trust with momentum investors.
How to stop sell orders from momentum value investors
The key to retaining momentum investors is to transition them from investing in your code to investing in the company. Using your announcements, take them into your website and on your journey.
Get your face in front of them, and show them the people, strategy and traction. Show them that there is more profit in holding than selling.
Value investors are ideal for non-indexed companies, as they invest in the company's future and typically spend time finding the company that they believe will become the next big thing.
They place a lot of importance on factors like the quality of management, industry and investor relations (in addition to fundamental analysis). Actively engaged, value investors often dial into presentations, say “hi” at a conference and talk you up to their friends and family.
Value investors stick around even when momentum in the industry eventually wanes. Many value investors start as momentum investors, but they transition because they learn (often the hard way) that share price momentum can be a double-edged sword.
That’s why value investors value team, vision, strategy and communication that much more. They want to be closer to the company so they’ll have a better understanding of their investment and consequently, a feeling of control.
How to attract buy orders from retail value investors
For value investors who already believe in your vertical, it’s a matter of selling your team, vision, strategy and results. You can do that by being proactive with communications and ensuring you’re accessible to investors.
For value investors who are unfamiliar with your vertical, you’ll need to provide some education to keep them interested. For technical updates (e.g. drilling or clinical trial results), it’s a good idea to present information so that even a novice value investor would comprehend.
Compare your vertical to others - equate a positive drilling outcome to clinical trial stages and results. The value investor seeks the upside, so aim to relate your data to this without offering direct guidance.
Don’t treat these people as analysts, imagine you’re at a BBQ and explaining what you do and why it's important.
How to stop sell orders from retail value investors
Value investors are willing to ride the ups and downs of a share price as long as they believe in the vision, strategy and team to take them there.
That’s why constant communication is key to keeping value investors holding, and if you can keep that up, you’ve got a blueprint to build a loyal base of retail.
Tempest (ASX:TEM) is a great example of a company that does a good job of this, providing updates that discuss their triumphs, and more importantly, their setbacks.
This sort of transparency goes a long way to building a loyal base of value investors, and as you’ll see, your high net worth investors appreciate it too.
HNWs are usually retail investors, and often have the same mindset or investing philosophy as value investors. Obviously, having HNWs on your registry is desirable because they can join your chairman’s list.
Approximately 7% of your registry is made up of high net worth individuals.
High net worth investors are usually more experienced than the other retail types and because of that, they’re more likely to include independent research as part of their investment decision-making process.
These investors value transparency and accessibility because they want to invest in companies that are responsive and honest with them. We interviewed a high-net-worth investor at our offsite last week, and they told us that some of their favourite investments were with companies that acknowledged when bad decisions were made.
Whereas companies that may perform better, but sugarcoat all their messages, are valued less. This makes sense - if I’m investing $100k+ into your company, I want to ensure that I can trust you’re being honest with me.
How to attract buy orders from high net worth investors
Be accessible and available to lower the friction to engage. These people will have questions, so making sure they have access to management to ask them is key.
Being accessible, therefore, is the strongest tactic you have to attract these investors.
How to stop sell orders from high net worth investors
Be accessible and proactive because HNWs can operate under the advice of brokers or money managers, and as we have repeatedly found, can execute sell orders based on a misunderstanding of your company.
Monitoring their trading behaviour, always being responsive and honest, and being proactive if they start to sell can be a great way to keep them on your register.
In fact, be proactive in general. Identify your HNWs on register and reach out personally. I spoke to a company recently who had an HNW on their register with $10k of stock and ended up putting $400k into the next placement - what an upsell!
Institutional investors live and die by their reputation, and their reputation is built by outperforming the market. That means, in 2023, an institutional investor can build its reputation by losing less money relative to the market.
Institutional investors can provide a significant amount of money to your company. But they also make decisions that can be based on criteria outside of your control in the short-term - you have little control over the criteria with which they make decisions.
They also have mandates outside of your control. The decision to buy your stock is almost exclusively determined by your market cap and financial performance - but these things can take years for your company to change.
These mandates also work the other way. For instance, if their global office decides that you’re selling all of their technology stocks, and the insto holds your company, then your share price is at risk on going on a downward run - this happened to a whole bunch of ASX companies in 2022.
How to attract buy orders from instos
When engaging with instos, get a feel of their mandate. If you’re a $50m company and they only start at $100m, you can’t get them now no matter how hard you try.
So instead of asking for cash, build a relationship and ask for advice.
“Would be great to catch up. We are growing fast and will soon be within your mandate. What would you like to see of a company like us? What would be your biggest questions to cover off if we were within your mandate?”
It’s great if you in the mandate but if not, leverage digital to get in front of them. You need to compete for their share of time to get their share of wallet, and that involves pounding the pavement, saying hello and making sure they get your video and engaging content too.
How to stop sell orders from instos
You need to get infront of the decision to sell. You can’t let it happen at their investment committee where you won’t know about it.
Be open and honest with them and don’t forget them once they’re in, so manage them well. And let them know that if they want to exist, to talk to you. Managing a big trade out is really important for your share price and optics.
Of the four personas of investors that are buying and selling right now, who is on your register?
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