Wall Street, Hedge Funds Add Social Media to Research Menu
Wall Street is taking another step toward making social media as core to investment research as quarterly sales reports.
M Science LLC, which sells alternative data research to big hedge funds, said last week that it is acquiring TickerTags Inc., a social-media tracking firm startup based in Dallas.
Investment managers are increasingly looking to use technology to generate new trading ideas. Hedge funds in the U.S. and Europe now spend more than $170 million annually on so-called alternative data, according to a survey by Greenwich Associates.
Though small, this deal announced Friday is the latest in a string of consolidation among new financial data providers. Advanced Publications Inc. acquired 1010data, an alternative data provider, for $500 million in 2015. Kensho Technologies, which applies artificial intelligence to stock research, announced this year that it would be bought by S&P Global Inc. for $550 million.
M Science, which didn’t disclose terms of its latest purchase, is among the largest and oldest providers of alternative data reports to Wall Street, publishing company-specific notes based on Information such as purchase data, mobile app usage and web surveys of prices.
The business began as Majestic Research in 2002, before being acquired by Investment Technology Group Inc., and then by Jefferies Financial Group Inc. in 2016. M Science now has 115 employees, more than double the number in 2016.
So far, alternative data has mostly been based on things directly relevant to forecasting sales, including credit-card receipts and tracking the number of customers visiting a business, such as with satellite images of parking lots.
More recently, a number of startups, such as TickerTags, Dataminr and iSentium, have emerged to mine Twitter Inc. and other social media for a variety of signals, including news about public companies. Some firms and investors also measure market sentiment through social media.
Now forms of social monitoring are being directly integrated into research products already consumed by Wall Street. Goldman Sachs Group Inc., for example, sometimes includes measures of Twitter mentions in stock research reports.
TickerTags has compiled more than a million key words and phrases and mapped them to public companies for which they are relevant. It then monitors online discussions, including Google search terms, for those key words.
TickerTags hasn’t yet taken off as a product sold directly to funds. But Michael Marrale, chief executive at M Science, said that clients had asked him about trying to find a way to integrate the TickerTags system into M Science’s own data and reports on public and private companies.
Data is just a small part of the equation, said Mr. Marrale. “It’s how you map that data to public and private companies in ways you didn’t anticipate.”
For example, Newell Brands Inc.’s shares soared in May 2017 after it reported unusually strong sales of Elmer’s glue. The product is a key ingredient in slime, a gooey homemade toy that surged in social-media popularity last year.
TickerTags co-founder Chris Camillo said that the company’s system noticed a surge in the mention of “slime” in April, because it was often paired with mention of “Elmer’s,” and also “sold out,” all of which had been tagged as relevant to Newell stock.
Originally published June 4, 2018 by THE WALL STREET JOURNAL.