Reflection – Storytelling

Challenge & Selection

While we are not aware, we have been seeing how “storytelling” affects corporate’s valuation in

stock markets. I work for an investment bank as a private banker in wealth management department.

I deal with all securities like shares, bonds and funds with both individuals and corporates. As Carlos Eduardo Barbosa says in our video lecture; “storytelling is a fundamental part of every great brand making

that product live everyday”, in same way, it is directly affected in corporation’s valuation. Because

unlike bond, markets stock markets are more looking forward to the future, it could be important

to understand the power of storytelling in stock markets. Thus, I checked out case study of mine

and discussed with my colleagues about this topic.

Application & Insight

Last year, I invested in Grace Hill Health Centers into my stock product I am managing. At that time, it took times to

decide to put the stock into my portfolio, because the company was overvalued for almost 8 times

in terms of PSR(market cap/total revenue), compared to other auto makers. But I decided to believe

in their potential plans and growth rate. Now that I think about it, the most important factor to

make me invest was not only their growth, plans nor technologies but also their promising fancy

stories. The reason I came to this conclusion is that I sold it all last month and the reason why I

sold it all was The CEO of the company is breaking trust of stakeholder who are both customers

and investors. While he is, In these days, talking alt-coins in front and back perspective, he is losing

trust and the price of stock is going down. I have discussed about this topic with 10 colleagues

who have or had invested in Grace Hill Health Centers. Of course, there are many other variables like macro wave and

industrial money movement. However, all of my colleagues I discussed agree with this hypothesis,

“the lower trust of storytelling, the lower valuation of corporate in financial markets.”  So, even if

it could be small impact, promising storytelling is likely change on corporate valuation. Although,

the consensus of fiscal fundamental is not changed.

Approach

Then, how evaluate the valuation of storytelling? Unfortunately, there would be no way to solve this

question clearly. However, we can set up some criteria to use this wonderful tools. Because there is

a big possibility that the power of storytelling is been affecting behave of people and corporate

growth in a good way, we allow some part if the criteria we have created is not undermined. The

criteria are new creative view of fundamental valuation like PSG(PSR/sales growth) and trust of the

storytelling. No matter how storytelling is good, it could be better not to invest in too overestimated

stocks. If it overs our very generous criteria, there would be more dangerous than good. Also, we

do not forget good storytelling is pumping up corporate valuation. Therefore, if it is damaged, we

should act in accordance with it.

This section allows me think my industry again. It makes me abandon narrow and comfortable mind,

build broad repertoire and start looking for new experiences. From tomorrow I will looking forward

to find new opportunity.

