How investors are using alternative data and predictive analytics tools
Investors are increasingly turning to satellite imagery, social listening tools and even song lyrics as sources of information on companies, according to a big data expert and board director.
Estelle Métayer, principal and founder at competitive intelligence advisory firm Competia, warned attendees at the CIRI national conference that their sources of competitive intelligence may be out of date compared with what some investors are considering today.
The primary sources of competitive intelligence for IROs today are external databases such as Ipreo and Nasdaq, competitors’ news releases, competitors’ websites, investor conferences and competitors’ conference calls, according to research from CIRI.
But Métayer, who currently serves on the board of BRP and was previously an independent director at Ubisoft, presented a series of new tools the buy side is using to both scrutinize management and predict future performance. She said she has first-hand experience of long-term-oriented investors using some of these tools as information sources.
Here, we summarize some of the tools and websites she highlighted.
Scrutinizing public company information
OpenCorporates is an online database that tracks information about company relationships and individuals who currently and formerly worked as company officers. Information about executives’ backgrounds, company shareholdings, trademarks and subsidiaries have always been publicly available, but ‘it was hard to put together – now an investor can easily track a company’s tax footprint, for example,’ Métayer said.
‘Imagine Relationship Science is LinkedIn multiplied by 1,000,’ she said. Similar to OpenCorporates, Relationship Science provides detailed information about an individual’s professional relationships with corporate lawyers, tax lawyers, bankers and many more, according to Métayer. This is a powerful tool, she noted, for examining an individual’s transaction history to see whether he or she has been involved in frequent M&A activity, or to spot potential conflicts of interest.
Glassdoor is a tool designed to give insight into the working culture at different companies. Employees, former employees and interviewees can leave reviews about their experiences and of the management they interacted with. Investors can use this information to see how the CEO is perceived internally and, therefore, what the output of the workforce is. This was such a concern during Métayer’s time at Ubisoft that the directors decided to tie part of the CEO’s compensation to his Glassdoor rating, she said.
Twitter mood analysis and Newsmap are both useful tools for investors to get a sense of the public support and press coverage companies receive, codifying the information into easy-to-interpret graphs and charts.
Anticipating future results with predictive data
Satellite imagery is increasingly being explored as a useful source of predictive data, Métayer said. UBS made headlines in 2010 when its analysts found a correlation between the number of cars parked in a grocery store car park and the revenues of that store. By building a model that considered satellite imagery from numerous stores, they were able to predict retailers’ revenue with a degree of accuracy.
Descarte Labs is one source of this data, providing searchable satellite imagery that can look for similar objects and identify where they are in the world. Métayer provided the example of how a commodity trading firm might look for real-time data on the whereabouts of every freighter carrying shipping containers. This can show how much trade is being done with China and India, for instance.
The most surprising tool Métayer mentioned was Rap Genius, a website that lists lyrics to hip hop songs and publishes crowdsourced comments about what certain lyrics mean. If a brand receives a favorable mention in a song by a prominent singer, it can have a noticeable effect on sales, as it did when Beyoncé mentioned Red Lobster on her latest album.
What can companies do about it?
‘Find your canary in the coal mine,’ Métayer advised. ‘Who in your department or company is in charge of spotting these big signals or an emerging crisis way before most people do? If you’re only looking for this information in a company press release, you are so late in the game.’
This doesn’t necessarily have to sit within the IR team, but IR teams need to have access to the data, Métayer said. She gave the example of Nestlé, which was targeted by a campaign from Greenpeace that ultimately led to an anti-company banner being unveiled above the chairman at the firm’s AGM. Since then, Nestlé has established a social media listening team that can be much more sensitive to potential emerging issues.
‘There’s so much information available today that can be used by IROs to source and analyze competitive information,’ Métayer said. ‘How can you monitor and control your story if you don’t understand that it can become global on many different platforms within minutes?’