When I started my hedge fund in 1998, I loved getting thick equity research reports. It felt like I was in the know because I could get anything.
But, paper would stack high and it was all pretty much useless. We had the Asian contagion followed by stocks like AtHome that traded on cute metrics the analysts were making up daily.
‘Hot or Not’ was a better tool for equity research.
Today, analysts are leaving the banks in droves. This is not inside information, or a new trend, just one that is accelerating. Finally.
Michael Bergen, a hedge fund manager, mentioned this in my stream the other day:
$JEF Jefferies dropping research coverage of 40 companies as 4 analysts have “left the firm”. Dropped names include $PEP $MGM $KMB $CLX $ADM
— Mike Bergen (@BergenCapital) December 23, 2011
I am not sure whether these analysts really created any efficiency, but assuming they did, you can see the new void. It won’t be filled with banks and ‘chinese walls’ anymore.
Forgetting every valuation metric we argue over for Linkedin $LNKD, Twitter, Amazon $AMZN, Facebook and Stocktwits, the ‘people network’ of the web outside the wall of the brokers and Bloomberg are good enough for 99 plus percent of equity investors to trounce the markets. I can’t comment on the bond markets because I have zero experience on either side so hopefully others can chime in in the comments.
Great investors/traders will use all these tools to find ideas and manage positions and great analysts will get discovered and paid by sharing their research and ideas across these platforms. Take a look at Rob Peck and Dan Ramsden the founders of Co-Rise. You won’t find better qualified media analysts or bankers. They can use Stocktwits in a compliant way to share ideas, market themselves, build an audience and network.
Today, ‘retail’ traders can create algos on their own using programs like Trade Ideas, the PPT from TheFLY and/or FusionIQ to name a few. You can trade Forex 24/7/365 using overseas brokerages like Etoro.com (I am an investor).
It has been our goal at Stocktwits to build the communications platform where all these people and all these products can find each other. You can follow people, tickers, sectors or a mix of them all. There is the growing ‘suggested‘ stream which is the best mentoring product I have ever come across for learning the language of the markets.
I can’t believe it has been three years since we started. I am excited for year 4 because we have a focused team, a more finely tuned product, the capital and the community to ramp things up.