How to transform a Shareholder Letter using AI

Content Marketing
January 21, 2022

In  the  corporate  world,  communication  is  extremely  important.  Publicly traded companies operate  under  a microscope, and every time they communicate with the public there are significant economic ramifications. Because of this tight scrutiny, good communication has the power to positively influence how shareholders, investment analysts and the general public perceive a company, while poor communication (even a slight misstep) can derail corporate strategy and cause long-term issues that require significant time and resources to fix.

It’s critical for corporate communications teams to ensure they are connecting with shareholders and presenting a realistic outlook of the company. This article will dive into how you can improve your corporate communication—specifically your shareholder letter—to avoid crucial missteps.

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Investment management firms follow a portfolio investment strategy based on dozens of data points—from macroeconomic factors like economic growth, interest rate risk, inflation exposure, credit availability, emerging market exposure and liquidity to style factors like value, volatility, momentum, size and more.

The shareholder letter plays a significant role in framing the narrative for these data points and influencing firms deciding which stocks to invest in.

It’s important for company leadership to set the right tone and convey the right information in the letter to support the company stock price as much as possible. A shareholder letter should share the company vision, provide context, and be balanced to encourage shareholders to stick with the company.

If the shareholder letter doesn’t encourage shareholders, the company and its share price can suffer as the markets lose faith in the company and react negatively.

shareholders writing letter

How True Content Can Optimize Your Communications Strategy

Let’s take a look at how the Content Analyzer tool from True Content can help leadership ensure they are hitting the mark in communicating with shareholders and encouraging them about the future of the company.

The tool ensures you are hitting the right tone and keywords to convey a positive message to shareholders who read your letter. Upon submitting your title and body of text, True Content will scan your text with the content your target audience is looking for and provide you with a comprehensive overview explaining how your text matches up.

The tool shows you the 2-3 main tones detected in your text (anger, fear, analytical, joy, etc.), overall sentiment (whether it is positive or negative based on a 100-point sliding scale), and readability level (primary school, high school, undergrad degree, master’s degree). It also gives you top keywords found in the letter and allows you to visualize (at a sentence level) where your tone might be a bit off.

Let’s take a look at an example of a  shareholder  letter  from  the  company  BlackRock and what

True Content can tell us about how effective it is.

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Overview

Here is the overview of the True Content report, which contains the basic information of the text being analyzed.

Tone

As we can see, the top two tones detected in the text are “joy” and “analytical”—which makes sense for a shareholder letter that conveys information and encourages shareholders. It’s good that there are no indications of tentativeness, anger or fear in the letter.

However, when we analyze the various sentences there are some instances of “sadness”:

Although it may seem counterintuitive to have elements of “sadness” in a letter that should have a positive tone, in the age of COVID-19 it is necessary for shareholder letters to acknowledge the difficult times we are living in and how it affects business operations. Therefore, it makes

sense that “sadness” is one of the tones detected in the BlackRock letter. With widespread lagging profits, employee layoffs and uncertain economic futures, it is important for company shareholder letters to empathize with readers and present a realistic view of the company. In a normal year that doesn’t involve a worldwide pandemic, instances of “sadness” or “fear” typically shouldn’t be picked up on in a letter—unless it is done intentionally to convey a somber message.

Overall Sentiment

The overall sentiment is scored using natural language processing to analyze the entire text. The primary tones in the BlackRock shareholder letter are “joy” and “analytical,” so it is no surprise that the overall sentiment of the letter is positive. Despite a difficult year, the BlackRock Chairman remains optimistic about the outlook of the company. Other letters that we analyzed had lower sentiment scores, perhaps due to not writing about challenges with enough nuance and hope for the future after COVID-19. One example is Netflix, which produced a shareholder

letter  that scored 49%. While this figure is positive, it is lower than BlackRock—which could be due to their outlook on the impact of COVID-19 going forward.

Readability Level  

Readability level refers to the level of education the audience must have to understand the text—it doesn’t mean that this level of education is the target audience. The top two levels, Master’s Degree and Undergrad, are often seen in corporate communications such as shareholder letters and annual reports. Writing a text that lands between Undergrad and High School is ideal for connecting with your shareholders as it is important to write as simply and clearly as possible.

The nature of shareholder letters typically requires advanced language that will bring the text to at least one step above Primary School level. Primary School level is appropriate for other types of communication—for example, when a company is trying to reach a community at large.

Las cartas a los accionistas requieren generalmente un lenguaje avanzado que coloque el texto al menos un grado por encima de educación primaria. En cambio, el grado de lecturabilidad correspondiente a primaria es apropiado para otros tipos de comunicaciones; por ejemplo, cuando una compañía trata de llegarle a una comunidad amplia.

Top Keywords

The tool detects the top 5 keywords in the letter, and we can see here that the BlackRock shareholder letter heavily focuses on finance, the markets and investor psychology—which certainly make sense for a financial institution. The keywords in your text will ideally correlate strongly with the core messages you seek to deliver to your shareholders, and it’s important to review the top 5 keywords the tool detects to ensure you are effectively conveying what you would like readers to take away from the letter.

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Conclusion

With corporate communications teams playing such an important role in the success of public companies, it’s more important than ever to ensure your annual letter connects with your shareholders. The letter should effectively convey company progress and future goals to make shareholders feel good about the company’s prospects, even in an uncertain economic time like during COVID-19. Utilize the Content Analyzer tool from True Content to gain the valuable insight you need into your letter’s tone, sentiment, readability and keywords to ensure you are conveying the right message to your shareholders and maintaining a solid communication strategy.

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