Anthony Hilton: Investors shouldn't believe the hype

The global economic crisis is no longer the fault exclusively of the media, although the negativity of so much reporting continues to play a part in the destruction of the confidence the system needs to function smoothly.

Now, however, the PR industry has been brought forward to take its share of blame. It finds itself in the frame for doing its job not wisely, but too well.

The chief executive of the Financial Services Authority, Hector Sants, last week delivered a robust speech in which he took institutional investors to task for not being more thorough in their assessment of the management of companies. In particular, he said many shareholders were 'too unchallenging' towards the normal channels through which boards broadcast information. Rather than take for granted that the world is as the company chooses to portray it, long-term investors should be 'challenging' of the information offered by a company. The dig at the PR industry came in his next sentence, when he said: 'Companies have become all too good at framing the information presented to us... i.e. focusing on information of the companies' choosing.'

In this he is absolutely right. Time and again companies appear on the Today programme and the chief executive will talk lyrically about the success of the business in boosting sales in some specific area, when the reality is that this is the one bright spot in what is otherwise a deeply depressing set of numbers.

PR consultants defend this, however, by saying that if they did not have something positive to say, their client would be taken apart by the interviewer. Like a barrister, they are there to make a case for their client.

Given the fees professional investors charge, they should see through the spin. Anthony Bolton of Fidelity, one of this country's most successful investors, has a simple technique. He keeps notes. He compares what management says this year with what it said last year or five years before. As a result he forms a clear view on whether the company knows where it is going or whether it is making it up as it goes along.

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