Getting into a trade is perhaps the toughest part about investing because of the level of research it takes. You get tips and suggestions from so many people, coming from so many directions that it’s difficult not to get utterly confused. And if you are an amateur at finance, there are dozens of “technical-sounding” terms about stocks that are not easy to wrap your head around.

There’s TV news coming from the likes of CNBC and Bloomberg with dozens of analysts constantly talking about their favourite bets. There are thousands of business and finance websites – most of them reporting the same popular news. There are umpteen newsletters and then there are hundreds of tip-giving services.

So how do you make your way through this clutter? Oh you could hire a Personal Investment Advisor or Investment Manager, if you find someone good, but that’s not an option for everyone since most may not want to engage with you unless you are a relative large investor (say $100-200k minimum).

Off late, stock-level Sentiment has emerged as a potential solution that may help sift through the mind-mess and narrow down your options to fewer “investable” stocks on a regular basis. Sentiment analysis for stocks has been around for a while, but only recently has the data and the technology matured sufficiently for a small investor/trader to be able to trust it. And here we’re not talking about social sentiment only. We’re trying to take a more holistic view of market influencers – from social media to the opinion of thousands of analysts to relevant news and finally the company fundamentals. When all of this is analysed together and in the right context, we often get signals pointing us to stocks that may make a move soon.

There used to general apprehension about sentiment analysis until a couple of years ago because there wasn’t enough data and the analysis algorithms weren’t mature enough, but that’s changing fast. Adoption on the institutional side has grown multiple-x so confidence levels have gone up significantly.

In fact we, at Stockal, have observed that when data volumes (for any stock) go up – more conversations, more analysts reporting about it, more business news about it – and are in sync with changes in sentiment then there’s usually a movement in the stock price over the next 2-3 days. So it might be a good idea to keep an eye on trader conversations and analyst reports (Estimize, SeekingAlpha) to see what’s buzzing. Before you dive into such information, though, start with these basic parameters when you look at listed companies:

  • Look at companies that are operating in the industries where you have some personal experience
  • There are always some themes which excite us personally … like technology, pharma, space research(?), sports etc etc. You are likely to relate to and understand companies in these areas better
  • Your favourite brands or companies that make products you use are also relevant. You will also be able to think about their competitive landscape (other products that you “could” use). Once you’ve narrowed down your options, look for the right conversations and sentiment indicators!

By the way, Stockal is very close to launching a mobile app that will do all of the above for you – in one place. We would love it if you give it a spin and tell us if it helped you make (or save?) money. You can drop your email with us for an Early Signup and we’ll make sure you get 1 full free year of our paid features and a lifetime of free upgrades.

At Stockal, we love to watch how markets respond to unique events and how our users (investors - you and old) can make the best use of circumstances to make smart investments. In Thoughts@Stockal, we do deep and broad analysis of such impactful trends and events.

Leave a Reply

Your email address will not be published. Required fields are marked *