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Share research – investing with alternative data

Emilie Stevens, Equity Analyst, looks at different data sources that investors might find useful and also gives useful research tips.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Emilie Stevens
Equity Analyst

Published on 23 July 2020

This article is more than 6 months old

It was correct at the time of publishing. Our views and any references to tax, investment and pension rules may have changed since then.

Andy Haldane, Chief Economist at the Bank of England, has been using everything from traffic flow data to energy demand to judge the impact of coronavirus on the UK economy. Household and business behaviour will be key to the speed of the recovery and these unofficial “fast indicators” give us a real time glimpse of what's going on with the economy – unlike the monthly Office for National Statistics GDP data, which is reported on with a delay.

We're not in the business of economic forecasting but Haldane isn't alone in seeking out alternative data.

Professional investors are expected to spend $1.7bn this year on alternative data, ranging from debit and credit card spending to satellite images of supermarket car parks.

Alternative might sound impressive but investors are always on the lookout for new information that might give them the edge over others.

It is impossible to produce a superior performance unless you do something different from the majority.

SIR JOHN TEMPLETON

We don't expect or suggest using satellites or spending eye-watering sums on research. But there are a number of tools and sources at your disposal that could help you in your decision making if you'd like to take a more hands on approach.

In this article we'll talk through some sources which we think could be worth a look. But remember this is by no means an exhaustive list and it's important to use different sources of information, financial and otherwise, to form your view.

This article isn't personal advice. If you're not sure if an investment or course of action is right for you please ask us for advice. All investments fall as well as rise in value, so you could get back less than you invest.

Google trends

Asos, Boohoo or M&S – which one would you say is searched most often in Google? How has that changed over time and does that differ between countries?

These are all questions that can be answered using Google Trends. It doesn't have to be companies, you could look at what topics people in the UK are searching for at the moment.

We might use Google Trends to help validate whether a company really is the brand of choice in the US, or perhaps what else people search for when looking for a product. It's a useful tool to corroborate a company's claims and perhaps find new names while you're at it.

Relative interest over time

Scroll across to see the full chart.

Source: Google Trends, accessed 20.07.20. *Relative interest: 100 = peak populairty, 50 = half as popular).

The Responsibility100 Index

Investing with environmental, social and governance (ESG) criteria in mind is on the rise, and as a result there's been a surge in sustainability and responsibility claims from companies. There can be a gap with what a company says it does and the reality, and that's particularly true in the newer world of ESG metrics.

Research Platform Tortoise Media has found a way to estimate the gap. Their Responsibility100 Index takes the FTSE 100 and ranks companies on their commitment to key social, environmental and ethical issues. Using hundreds of publicly available data points like government, regulator and company reports the index measures the gap between what a business says and what it does – its ‘talk versus walk'.

In the Top 10 you'll currently find the likes of Unilever, AstraZeneca and Burberry. Those that do well demonstrate a strong performance across the board. For example, Unilever's 100% recycling rate in 21 countries, consistent reduction in emissions intensity and a negative gender pay gap.

Travel and mining sectors are those found to consistently have the biggest gap. While travel is the lowest for both ‘talk and walk', the mining sector has the lowest walk score – indicating company reporting that regularly focuses on sustainability but is much bleaker in reality.

We know that ESG investing and considerations mean different things to different investors and that makes company comparison a challenge. The Responsibility100 Index isn't a one stop shop to an ESG investment. But we think it could be a useful tool in highlighting if a company is as responsible as it claims to be.

Is it time to consider ESG investing?

Sector insights

Whether you're already invested or about to invest, knowing what's going on in a sector – the key players, growth prospects and market size – is crucial.

We use a number of sources to form an opinion about a sector. Many of them such as company and regulator reports, we expect you'll use too but below are a few more we think are worthwhile.

Newzoo – for Gaming

The Gaming industry is a growing one and that's not just over lockdown.

Newzoo is a good starting point to understand market sizes, key technology developments and the main players.

In 2018 global Gaming revenues were $138.5bn and the number of gamers worldwide was 2.4bn (just under a third of today's population). By 2023 those numbers are expected to reach $200.8bn and 3.1bn.

All gaming segments have seen an increase in revenue and engagement over the last year, with global lockdowns playing a big role in the rise. The mobile gaming market is expected to continue to see the fastest growth rates. This is because they're easier to access and aren't as complex as the console or PC markets.

2020 Global Games Market by segment	$bn	YoY %
Smartphone	64	16%
Console	45	7%
PC Games	37	7%
Tablet	14	3%

Source: Newzoo, Global Games Market Report, accessed 17.07.20.

Last year the top 50 publicly listed companies accounted for 85% of global game revenues, with Chinese giant Tencent keeping the top spot. Asia-Pacific continues to be the fastest growing market and now makes up for nearly half of all global game revenues – so it'll take a lot to knock Tencent from its perch. Both Microsoft and Sony are launching next generation consoles later this year, but with mobile gaming so dominant, will this be enough?

Kantar – for Retail

If you're looking to track the rise of the discounters, understand just how much shopping is done online or how coronavirus is changing our habits – Kantar could be a good place for you.

Their latest insights into how coronavirus is changing the retail landscape show how lockdown has pushed shoppers online – the share of global consumer goods shopping is now 41% higher than last year at 12.8%. In the UK, despite lockdowns being relaxed people are still choosing to shop online. In the month to mid-June online grocery sales were up 91% (to 1 in 5 UK households) – thanks to new delivery slots being made available.

The cumulative impact of lockdown helped Ocado reach its highest ever market share of 1.7% – reflecting highest industry sales growth of 42.2% over the period.

Grocery market share

Scroll across to see the full chart.

Source: Kantar, accessed 17.07.20.

Research tips for investors

Financial performance over time

It's best to use financial data from the original source like a company's annual reports rather than news articles. It's important to look over a number of years too, HL's share factsheets can help here – the ‘financials' tab gives the last five years of performance.

Non-financial data can build a wider picture

Non-financial data like Google Trends or employee or customer review websites, can help show companies in a different light. This can a good way to get a sense of the company's management but might also help you to draw competitor comparisons.

Talk about it

Talking to others or even the company itself is a good way to sound out your ideas. And if no one's there at the moment, our investment team recently gave us a rundown of what's been on their summer reading list in recent years – this could be a good starting point for your research.

Investment books for summer

Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Thomson Reuters. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Past performance is not a guide to the future. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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