Sep 20, 2018
Welcome to the Broken Pie Chart Podcast Episode 7. In this episode Derek Moore is joined by Alpha DNA Founder Wayne Ferbert to discuss how they are using big data, machine learning, digital internet analytics, and proprietary algorithms to detect changes in consumer demand which can lead to pinpointing earnings surprises in a universe of 3000 companies across various market caps. These changes in trends seen by analyzing the digital internet footprint looks to determine whether companies’ quarterly earnings announcements will surprise the street and by how much. Wayne also discusses turning these high-level analytics into investment strategies including a long/short version and a best picks strategy.
Key Takeaways:
- • The early ways institutions tried to generate alpha including overhead parking lot photos at Walmart and satellite photos of oil tankers
- • How analyzing internet data can identify changes in trends and potential earnings surprises
- • The complexity of turning raw “big data” into something usable
- • How the Internet Advantage Strategy (IAS) Long/Short looks to own the best companies and short the worst ones to minimize systematic market risk
- • The goal of delivering alpha through Alpha DNA’s Best Picks Strategy
- • How analyzing the hidden demand trends can help to find edges in earnings forecasting
- • Discussing the Harvard Business Review article around measuring digital strength of a company versus its market cap
- • Opportunities for companies to increase their digital footprint
- • How President Trump’s comments about going to a twice a year earnings release versus quarterly might affect company forecasts.
- • What effect if any the recent Facebook data controversy might have in the ability to continue to utilize internet data in their strategies
Mentioned in this Episode:
Harvard Business Review Article https://hbr.org/2017/09/are-you-accurately-measuring-your-companys-digital-strength
Alpha DNA www.alphadnaim.com
Buy and Hedge Book by Wayne Ferbert and Jay Pestrichelli https://amzn.to/2xcfeZv
Broken Pie Chart Book by Derek Moore https://amzn.to/2MibTSk