"Big data isn't useful for investment purposes."
So said my friend Walt during one of our recent arguments discussions. By way of background, Walt is not an über-successful 70-year-old investor who earned his chops well before the advents of Twitter, Facebook and their ilk. Rather, he's a man of a similar age to yours truly. We're college friends. To boot, Walt works for IBM, a company that has bet much of its future on big data.
Of course, I disagreed with him. (Walt and I have a history of animated debates across a number of issues. Case in point: I love LeBron; Walt hates him.) On the big data front, my primary argument was anecdotal. A little more than two years ago, I bought Apple at its near record-high. I was tired of missing out on the gains that respected analysts were promising. At that time, everything that Apple did helped its stock price.
Preventing bad investment decisions
Since the time of my purchase, Apple's stock has plummeted. (I'm convinced that my relatively small position singlehandedly drove down its price.) Kidding aside, today Apple sentiment has dramatically shifted. Nine million iPhone 5s's sold? Snooze. Sentiment is nothing short of horrible. Apple's P/E ratio is hysterically low, especially when you consider the mind-boggling $140 billion it holds in cash.
As an investor, what to do? Why not attempt to quantify that sentiment into something useful? While not a replacement for traditional financial metrics, wouldn't sentiment help make better investment decisions?
I'm not the only one who believes so. Consider RavenPack, a company that turns unstructured news into structured data for systematic trading and investment, risk management and market surveillance. Aggregating and analyzing blog posts, tweets, articles and other sources of unstructured information may well help people like me avoid buying at the worst possible time.
Simon says
Big data naysayers continue to abound. There may not be too many proper case studies yet in the investment world, but don't think for a minute that that fact negates the power of big data.
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What say you?
