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Using technology to mimic guru investors (Future of Investing)

Posted on August 5, 2010 at 12:55 pm

This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it. :-)

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Piggyback investing is about following the “right” people.  In a lot of ways following overall sentiment of an online community is exactly what you want to avoid. The simple premise is that “crowd sourcing” is only valuable when you are able to accurately define and isolate the right crowd.  Accepting this as essential first, then any application that then can overlay real-time information about the “right crowd’s” moves is valuable. Here are just a few applications that can benefit from real-time information gathering:

  • Manager selection:  The AlphaClone platform allows you to tap the collective intelligence of groups of managers that are either predefined by us or defined by the use.  Some of our groups are dynamic in that the list of managers that make up the group change ever quarter based on some criteria. Take our High Concentration fund group: it selects the 25 managers each quarter that have the highest disclosed market value spread over fifty positions or less.  I could see a dynamic group that is constructed of the 25 managers that have garnered the highest votes for inclusion amongst the AlphaClone user community or the 25 managers whose fund page has had the highest visitor traffic over the past 30/60/90 days.
  • Stock selection:  our platform uses quarterly public filings to select the holdings that make up clone portfolios.  A real-time overlay that precipitates intra quarter changes in portfolio weightings for securities in the clone would be really interesting.  Real-time sources could be intra quarter public filings from the manager or managers in a clone (13G/13D filings), real-time analyst consensus recommendations (especially upside and downside “surprises”), or real-time events (bankruptcy, M&A).
  • Strategy selection: our platform allows investors to create and backtest clones based on different “clone strategies” (Top Holdings, Best Ideas, Popularity in top 20) and customize clones by employing hedging options and rebalance options.  We consider that simply a starting point.  I can see our community providing feedback on new clone strategies they’d like to see as well as tips on implementing clones.

I see the real time web as a new communications medium that definitely has relevance for investors and investment services but just like any new communications medium, how useful it will be will largely depend on how it is applied and by whom (i.e. yahoo stock message boards vs. twitter feed from “pro investor here”).

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Mazin founded AlphaClone in 2008 with the simple purpose to empower the average investor by giving him intelligent, instant and transparent access to the world’s best fund managers.  Mazin was a 12-year veteran of technology-driven media businesses including roles at Time Warner and OpenTV.

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  • Social media’s impact on marketing of investment management (Future of Investing)

    Posted on August 11, 2010 at 2:47 pm UTC

    This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it.

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    Social media is a shock to the way investment management marketers are accustomed to communicating. It’s conversational, transparent, improvisational, experimental—all of which challenges the status quo. Investment marketers who want their firms to continue to be relevant recognize that changes must be made in how firms interact online. For them, social media can serve as a platform to advance strategic change.

    The goal of a conversation is to understand, and we see marketers working to better align the value of their firms’ content/thought leadership, how it’s packaged and where it’s delivered with what their distribution partners and investors want and increasingly expect. Slowly, they are introducing a new organizational discipline—listening—and they’re beginning to adjust and refine based on what’s heard. Some social media devices—all functionality that represents endorsements, for example—are not available to marketers for regulatory reasons. But other means can be put to use and we believe that firms’ authentic efforts will be well received. Success? It will be enjoyed by those who prevail, through trial, failure and a new rigor for measurement and analysis.

    *—> Like what you see? Hey! Don’t forget to subscribe to the free Tradestreaming newsletter for updates, tips, and special offers

    Pat Allen, principal of the digital marketing consulting firm Rock The Boat Marketing and
    founder of AdvisorTweets.com, Chicago.

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  • Welcome to a wired world, investors and financial advisors (Future of Investing)

    Posted on August 10, 2010 at 12:51 pm UTC

    This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it.

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    Welcome to a world where the traditional ways in which we gather information, develop relationships, and make important decisions have changed dramatically.  Welcome to a wired world!  Our influences have changed with the explosive growth of the internet and the proliferation of blogs, social networks, online ratings and reviews, and micro-blogging
    services that allow us to share, connect, engage and advance our knowledge.  Our networks are accessible from anywhere and everywhere, in real time, through our mobile devices and constant wired connections.  Whether we realize it or not, these online information channels and networks are significantly changing the way we think and behave.

    The financial services industry is no exception to the wired world revolution with the emergence of new media investment platforms, social investing sites, and even financial advisors and professionals delivering their insight and guidance through blogs, social media and social networking.  At the same time, consumer access to financial information and guidance, low cost investment vehicles and platforms, increased transparency and choice, and new media tools are empowering individual investors to take control of their
    wealth.  We have a paradigm shift happening that will forever change the future of investing like never before.

    Investors who can sift through all of the financial content and find the “quality” insights will have the best opportunity for success.  The key will be discovering relevant resources and strategies that they can implement with discipline and consistency.  Financial advisors and professionals who provide high quality, differentiated content in their niche markets and focus on their areas of expertise will be most successful in the race to win relationships with investors.  Blogging, search, and social media will all be part of the strategy equation for attracting the right investors into a suitable model based on their goals and objectives.  Ultimately, investors AND financial advisors who understand and embrace the merging of social relationships and technology can truly become partners in achieving their respective goals.

    *—> Like what you see? Hey! Don’t forget to subscribe to the free Tradestreaming newsletter for updates, tips, and special offers

    WIRED ADVISOR was founded by Stephanie Sammons (LinkedIn).  Stephanie spent a total of 15 years in the financial services industry at two of the largest global wirehouse firms and served as a Financial Advisor, Branch Manager, and Regional Sales Manager.

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  • Bringing to life history’s best investing strategies via technology (Future of Investing)

    Posted on August 9, 2010 at 1:18 pm UTC

    This post was originally included as part of an ebook that I published alongside the launch of my book, Tradestream, entitled “Tradestreaming and the Future of Investing”. The content was so good I wanted everyone to have access to it. :-)

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    At Validea, our belief is that investors can produce market outperformance by following the quantitative strategies of Wall Street greats, like Warren Buffett, Peter Lynch, John Neff, Joel Greenblatt, Ben Graham and others.  Rather than creating new strategies, Validea takes the publicly disclosed stock selection methods outlined by these successful long term investors in their writings and lectures and captures their methodologies in a systematic investment approach that allows for bottom-up stock analysis, stock screening and model portfolio creation. While advancements in technology and fundamental stock data availability have been crucial in the development of the next generation of stock screening tools, Validea’s algorithms are proprietary and incorporate aspects of artificial intelligence so that certain criteria are measured in the same way a human would measure them.

    Simple screens, like screening on the Price-to-Earnings ratio or Relative Strength, are useful as a starting point for building a portfolio, but the sophistication and uniqueness of guru-models like Validea’s allow for the selection of top rated stocks according to each proven fundamentally-based investment strategy. By vetting over 6,000 securities for over 7 years through these models, which have anywhere from five to fifteen distinct criteria, we have demonstrated the value of these approaches through our model portfolio tool. By holding baskets of stocks that pass through a guru filter, investors are able to statistically put the odds in their favor and over time, this results in 55-60% of portfolio positions winning. Applying these strategies through a disciplined framework allows for excellent potential for long term market beating returns.

    *—> Like what you see? Hey! Don’t forget to subscribe to the free Tradestreaming newsletter for updates, tips, and special offers

    Justin Carbonneau is a partner at Validea Capital and manages the firm’s Private Client Group. He also acts as the principal business development officer for the company and is responsible for managing growth efforts and strategic initiatives. Prior to joining Validea Capital, Justin was a controller for a Fortune 500 healthcare company where he was a member of the firm’s leadership development program.

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  • Insider trading activities (SINLetter) — August 8, 2010

    Posted on August 8, 2010 at 3:02 pm UTC

    Asif Suria has done great work over the past couple of years.  Check out what he does at SINLetter.com.

    He publishes an Insider Weekend which runs down insider buying/selling trends (a Tradestreaming hallmark) and highlights specific names that are seeing significant insider activity. Here’s the current installment.

    Insider buying increased once again last week with insiders purchasing $21.82 million of their stock when compared to $13.42 million in the week prior. Selling also increased with insiders selling $821.45 million worth of stock when compared to $498.22 million in the week prior.

    Suria compares buy/sell ratios to previous weeks’ activity:

    The adjusted ratio for last week dropped once again to 21.82. In other words, insiders sold almost 22 times as much stock as they purchased.

    On the notable buy/sell side, Suria calls out activity in Akamai (AKAM), Ford Motor (F), and Herbalife (HLF) among others.  Check it out.

    —> Like what you see? Hey! Don’t forget to subscribe to the free Tradestreaming newsletter for updates, tips, and special offers

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  • Barron’s gets Tradestreaming’s evolution of the investing app store (but doesn’t admit to knowing me)

    Posted on August 8, 2010 at 12:34 pm UTC

    I’m a pretty easy going guy.  I never wanted to use this platform to vent or say anything hurtful about anyone or anything.  It’s just not my style — Tradestreaming is a resource to help investors, journalists, and industry professionals make better informed decisions.

    So, it’s got me a little ticked off that the venerable Barron’s has been taking some of my ideas and repurposing them — without referencing this site.  I’m all for using my ideas and expanding on them.  I don’t have a monopoly on ideas.  Just tell your readers the source of your thoughts.  I do it.  C’mon.

    This week’s Electronic Investor article entitled “Here Come the Third-Party Apps” is a direct reference to my July 6th piece, “Inching towards an investing app store“.

    For most of us, this “open” collection of obscure programming utensils and standards—including, for example, a programmers’ tool kit with the memorable name SDK, or files tagged with the extension .XML—will be close to meaningless. But you may already be using some kind of trading app or plug-in that customizes your connection to E*Trade, and there’s no question that, with the proliferation of gadgets and third-party Websites, more such customizing and control programs are on the way. Like other online investment outfits, E*Trade doesn’t want to restrict its customers’ interface and functionality options to its in-house offerings.

    The theme of brokerage platforms morphing into exchanges where 3rd party application developers can reach investors has been a common there here and on my other blog, New Rules of Investing.

    Starting in July 2008 (on New Rules of Investing) and continuing a year later (with E*Trade further blurs the line between full-service and DIY investing), I’ve been writing about this trend– no one else really has. I’ve even included a section on it in the last chapter, Future of Finance, in my new book, Tradestream your Way to Profits.

    Again, I have no problem riffing off my ideas.  That’s why I write: to engender some thinking and discussion.  Just link back.  Listening, Barron’s?

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About Tradestreaming

Tradestreaming is a community of investors learning directly from experts. I’m Zack Miller, investor, entrepreneur, and founder of Tradestreaming.com and I literally wrote the book on how to invest in the age of Facebook and Twitter. Tradestreaming is the resource I’ve created to help me become a better investor.  I believe it will help you … Continue Reading