June 20 - The increase use of Twitter and other social media to provide stock tips to investors is giving rise to a new class of analysis and scrutiny of the tips and those making them. Bobbi Rebell reports.
In the high speed race to get ahead on stocks- for a growing number of investors- nothing matters more than the cashtag. Started by StockTwits back in 2008- cashtags have become ubiquitous- up 550% in the last three years. Brian Egger, author of the upcoming book Social Media Strategies for Investing: SOUNDBITE: BRIAN EGGER, CEO, BREAKINGCALL.COM AND AUTHOR, SOCIAL MEDIA STRATEGIES FOR INVESTING (ENGLISH) SAYING: "The bull and bear indicators on StockTwits are actually significant predictors of the stock price returns for stocks like Apple, Google and Microsoft that is a major example of the predictive ability of these venues." There are two basic approaches. Crowdsourcing- sites like StockTwits, Estimize, SumZero and Harvest Exchange. They aggregate stock commentary, earnings estimates and investment research. SOUNDBITE: BRIAN EGGER, CEO, BREAKINGCALL.COM AND AUTHOR, SOCIAL MEDIA STRATEGIES FOR INVESTING (ENGLISH) SAYING: "Estimize, which claims that their crowdsource estimates are more accurate than the Wall Street consensus 67 percent and 77 percent of the time. They clearly rate people. There are stars within their group that are more accurate predictors. So, within each of these social communities and platforms there is a weighting or a ranking system." And then there are data analytics services- like Dataminr, Gnip, Social Market Analytics and Market Prophit. They scrub the raw data and analyze the messages based in different algorithms, and sell it to hedge funds and proprietary traders. SOUNDBITE: BRIAN EGGER, CEO, BREAKINGCALL.COM AND AUTHOR, SOCIAL MEDIA STRATEGIES FOR INVESTING (ENGLISH) SAYING: "They buy this big Twitter firehose data. They ingest it all and then they eliminate duplicates and spam. They try to verify the location and identity of the Twitter messenger. They try to weight, based on social media influence, the Klout scores of these individuals, and they also subject all this data, to linguistics analysis, to determine whether or not it's a real signal or not." So for example, Market Prophit not only tracks how much chatter there is on a stock- they use an algorithm to score and rank who has had the best calls on a stock. MarketProphit CEO Igor Gonta: SOUNDBITE: IGOR GONTA, CEO, MARKET PROPHIT (ENGLISH) SAYING: 'We rank people also per security so we might say who are the best three pundits for Facebook last week and we identify them every day and we update those scores every day." Gonta says his site offers a blend of Klout and Morningstar, mixing social media credibility- with fundamental accuracy. SOUNDBITE: IGOR GONTA, CEO, MARKET PROPHIT (ENGLISH) SAYING: "We have identified a few folks that you may have never heard of and they don't have many followers on Twitter but if you look at their track record of their predictions on our website it far exceeds market performance." Market Prophit just partnered with Interactive Data and will be on their eSignal platform.