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Finding Investment Opportunities The Modern Way: Through Social Media

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July 29, 2016
Finding Investment Opportunities The Modern Way: Through Social Media

Back in January 2014, as a polar vortex bore down on Manhattan and I was sick at home reading Twitter, I had a tech epiphany while following Brian Sozzi’s coverage about the downfall at Sears in real time.

My epiphany was this: consumer shifts on Main Street are often documented in social media long before they show up in business news. Think about what the average customer does these days when they’re fed up with a company’s service or products: They go online and complain. And when a company serves customers well, that’s also frequently noted on social media.

Tracking social media sentiment and volume of brand mentions can help investors discern trends, as well as offer potential clues into a company’s sales distribution. That kind of knowledge can be key to identifying potential investment opportunities. But until now, there was no way to collect all that sentiment in one place with a single, customizable tool.

That’s why we’re so excited about the latest release in thinkorswim! We just launched a first-of-its-kind capability allowing investors to analyze social mentions of the brands that roll up to publicly traded companies. This new capability, the result of an ongoing collaboration with social data firm Like Folio, puts an array of consumer sentiment and brand enthusiasm in the hands of retail investors in the thinkorswim trading platform.

Here’s how it works: Remember my experience with Sears? A retail equities analyst and a columnist at TheStreet.com lit up social media for several days with posts about the poor conditions inside Sears’ stores, and the analyst also crowd-sourced his followers to post photos and observations about the same issues. Traditional business news sources didn’t cover any of this. But just days later, Sears announced that its quarter-to-date same store sales at fell 7.4%. The company adjusted its loss forecast down and the stock took a 12% hit.

Anyone with insight into those social product and service mentions in the days leading up to Sears’ negative announcement would have had additive insight to support their view on Sears. The new tool we’re rolling out can analyze social mentions at the product level, track them by favorable or unfavorable sentiment, review potential changes over the past three years, and visualize this in a chart showing the frequency of social posts.

FIGURE 1: CUSTOMIZABLE MENTIONS.

Investors can filter mentions that are related to any given division of a company.
Source: thinkorswim by TD Ameritrade. For illustrative purposes only. Past performance does not guarantee future results.


And it’s customizable. Investors can filter mentions that are related to any given division of a company. For example, if a park and resort company also makes movies (use your imagination here), investors can program the tool to track mentions that are related to just the movies, or to just the theme parks. It’s that granular. Is the newest super hero flick getting favorable social posts from movie goers? Are people talking about this film more than a competitor’s? Anyone with the new tool will have that insight, and can use it as another tool to use to help find potential trading opportunities.

As we roll out this new feature on the platform, it’s limited to 30 companies, but we’re planning to expand it on a regular basis. Learn all about the new feature in this short video:

I’m truly excited about this, because like a lot of people, I can’t exist without social media. Many of us use social media to track “fun” stuff that has nothing to do with the markets. But now that social media provides every thinkorswim user a unique data feature that can offer new investing insight, it’s even more tempting to pull out the phone.

I look forward to using this exciting new tool, and I hope you’re as thrilled about it as I am.

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