Zack Miller is the Managing Director of Lighthouse Capital Ltd., a boutique investment firm servicing high-net-worth investors from around the world and the author of the book Tradestream, which documents how investors are using new technologies to assist their investing. In this post, he highlights five companies developing new services of particular relevance to investor relations professionals at public companies. You can learn more about these services and others on Miller’s website Tradestreaming.
A COMMON refrain from investor relations professionals is that they don’t pay much attention to information on the web and in social networks because the audiences they care about most — institutional investors and analysts – are not following or participating in these media.
And for the most part they are right, individual analysts and portfolio managers have little incentive to use Twitter or Facebook to get their information or share their views when regulatory and firm compliance restrictions discourage it. There’s also the fact that Wall Street’s finest don’t need to go online when they already have preferential access to corporate management through the IROs on their speed dial.
However, what most don’t realize is that institutional investors and traders are increasingly incorporating alternative sources of information from the wider web and even social media into their decisions. A plethora of start-ups staffed by brilliant engineers, mathematicians and scientists is creating tools to glean valuable insights and trading signals for the deluge of information coming online around the world every hour. The chief buyers of these products are hedge funds, algorithmic traders and even retail investors.
In this article, I focus on five such companies that investor relations professionals should know about:
1. Recorded Future
A quantitative tool built by quants, Boston-based Recorded Future has developed proprietary linguistic and statistical algorithms to extract time-related information from general news sources, trade journals, blogs, and social media. What that means simply is the firm is using web content to predict the future. With both a retail product and an interface for institutional investors, Recorded Future plumbs the depths of the web to help investors handicap the probability of future events with the world’s first temporal analytics engine. The company’s services also can be used by IR departments for competitive analysis and brand monitoring. Search giant Google is an investor in the company. The video below gives you an overview of the company’s services and technology.
Built by the scientists who developed Hakia, a competitor technology to Google, SENSENews collects and semantically filters fundamental information — facts from news sources — about companies from around the web. SENSENews also looks at sentiment around this data — real-time opinion from blogs and Twitter — and isolates 16 different investment criteria around the stocks it monitors. By identifying which drivers can most impact a stock’s price, SENSENews charts the net difference between the good and bad news on a stock and puts all this into context, helping to forecast future price movement.
Selerity uses search technology similar to what Google uses to scour official and unofficial sources for meaningful new information that may not have been picked up by mainstream sources. Investors know that full disclosure is asymmetrical and so pay for services to speed up delivery of tradable information like earnings, oil inventories, and retail same store sales. Selerity, in partnership with real-time communications platform StockTwits, offers streams of this information delivered hot, daily. The company recently picked up unpublished earnings news from Microsoft’s website and says that it regularly encounters similar information at other companies.
Profiled recently in BusinessWeek, this firm is the brainchild of author and investment analyst, Richard Peterson, M.D. (yes, he’s a medical doc). His firm’s software monitors tens of thousands of newspaper articles, blogs, corporate communications and presentations, and Tweets. The software then analyzes the changes in over 400 types of sentiment on over 6000 U.S. stocks. MarketPsych sells this data along with its overlay on top of macroeconomic and firm-level information to hedge funds that create quantitative strategies accordingly.
The deluge of data makes it really hard for buy side and sell side analysts to stay on top of the news affecting their sectors and portfolios. Increasingly, they are turning to firms like Ravenpack for help in creating risk management tools or developing strategies to unlock actionable content from unstructured data. In partnership with Dow Jones, this multinational firm provides real-time analytics of much of Dow Jones’ library of news. By helping traders score the importance of the news and sentiment on professional newswires, blogs, and hundreds of financial sites, RavenPack enables algorithmic and quantitative funds to exploiting profitable opportunities.
To stay informed about developments in financial technology, see the Tradestreaming website.