Most Analysts Miss Data That Affects Their Models—Will You?
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Long-term performers continuously innovate in the research process. In recent years, expert networks and channel checking services have added new data to analysts’ models. Today, the web has emerged as a vast, unmatched investment research database, with:
- fundamental data on companies––trapped in text form
- emerging signals of risk in a market or region––before they hit the tape
- global and local insights on every company––not mentioned in standard analysis
- comments from experts––outside of the widely used expert networks
The Web Moves Markets––Does It Move You?
The web affects your companies today. Behavioral finance research shows that blogs and the web reduce insiders’ ability to out-trade the market and directly affect prices.
Most securities analysts have only begun to exploit the web’s power. Google and Wikipedia are great for basic research on definitions and history, and Google Alerts can be a cheap (if time-consuming) way to track general news.
CASES: THE WEB IN REAL LIFE
(Really) Full Disclosure
A tech PM holding Netflix found an influential tech blogger starting a discussion of his beta-test of Netflix's (unannounced) XBox offering. The PM put a pointed call to Reed Hastings, the CEO, on revenue upside timing and scale.
The Other Shoe Dropping
A consumer device analyst noticed a reduction in both attrition and internal reshuffles at Motorola. This led to a series of conversations with observers of the industry to test for a potential beginning of a turnaround.
Prioritizing Investment Ideas
An EU-focused portfolio manager saw a spike in blog attention to two merging European companies, Taylor Nelson and GFK, and then drilled down to test his thesis on the sector against emerging consensus.
Edge Is Everything
Analysts spend thousands of hours a month reading, talking to management and outside analysts, and spending significant amounts on expert networks, independent research, travel, and sell-side analysts––all in the hope of getting a edge through access to differentiated, non-commoditized perspectives on companies and markets. But the web is more vast than any set of experts––and differentiated because it has not been usable in the process.
What’s New––The Web Can Drive Your Process
New search-driven research tools fit the web to your process––from qualitative analytics, which reports data points, trends, and anomalies on companies and investment topics, to screen-scraping price data, to ticker-indexing real-time web news.
Put Your Research Process on Offense
We stand at a tipping point, where the web is emerging as an actionable investment research database. Analysts who outperform their peers through superior research can break out from the pack by putting the web to work.
–Penny Herscher, CEO, FirstRain