How to profit from the death of a trend
We’ve been asked several times how we use social data in our investing and trading decisions. So, we put together a little five-part series that explains a few ways that we (and our institutional friends) are using LikeFolio data to discover trading opportunities.
Social Data Trading Lesson 1: Comparing a stock vs its history.
Trends are important. Changes to trends are even more important.
Case in point, Deckers. The makers of Uggs boots were riding a trend of their product being popular for quite a while… until the trend stopped. Our social data picked up this consumer shift and correctly predicted that $DECK would miss earnings.
That turned out to be an awesome trade.
The data: Mention volume on a brand by brand basis is available on the TD Ameritrade Social Signals tab, powered by LikeFolio.
The play: Look for big changes in mention volume around a brand that makes up a majority of the company’s revenue. It’s especially juicy when you find these consumer shifts before Wall St analysts or the company start discussing them.
Examples: Budweiser, Tesla and LinkedIn are all getting a lot of chatter on social. In addition, each of them is fairly reliant upon a single brand name for most of their revenue. Should any of these companies see a dramatic dip in mention volume, we’ll take a close look to see what might be going wrong with the company.
Sometimes it’s nothing but a normal lull in chatter, but other times (like with Deckers last quarter), it’s a juicy trade just waiting to be made.
— Andy Swan is the founder of LikeFolio, which searches all of Twitter for important shifts in consumer behavior around the brands owned by publicly-traded companies.