Data analytics and tracking is a crucial part of the investment process. This allows timely action to be taken to eliminate the reason for mentioning companies not in the investment portfolio. In real time, the investor is able to track the progress of his portfolio. Today you will learn what alternative data is, how to use it correctly, how to collect and integrate it into the investment process in a timely manner.
What is alternative data?
In the financial sector, a strategic approach to collecting and analysing public alternative data is particularly important. This allows you to regulate the investment process to make the most favourable deals. As a result of your work, you get a whole package of documents that includes data from different sectors. In particular:
SEC (Securities and Exchange Commission) documents.
Quarterly reports publicly released by the company.
Trading volume of shares for a certain period (day, week, month, quarter).
Also, the collection of public alternative data is investor- and company-generated information about their performance. The main advantage of the process is that the indicators are updated in real time. You will always stay up-to-date.
In practice, such information represents:
Comprehensive information about user attitudes towards a particular company. You will be able to know the mood of the consumer in order to use the data to predetermine the pace of development of the product offered by the company.
You get an information advantage by being able to familiarise yourself with information on delivery routes.Satellite images of the plants, the company, and its activities are provided as information. This will allow you to pre-empt purchases even before reports are published.
Ability to conduct company profitability assessments. Obtain and analyse information on transactions and sales volumes of the industry.
This information is most valuable when conducting a full analysis of a company’s performance or the development of an entire industry. It allows you to stay ahead of the curve by basing your investments on data, not promises.
Types of alternative data
The industry emphasises different types of alternative data. In the quest to generate alpha, it pays to utilise the full range of information, from consumer sentiment, to weather conditions in the producer’s region. Despite the variety of information generated, there are three main types of information. Below you can take a closer look at each of them.
Transaction data
This type includes all information about the company’s credit card transactions as well as point-of-sale transactions. You will be able to get insider information long before the official financial reports of the company are published. Evaluate the company’s sales, highlight the most profitable periods, and analyse the process of revenue growth or decline.
Renting mobile proxies will come in handy in this process. With additional tools to create an anonymous environment, you can get even more exclusive information. Of course, even a proxy will not be able to offer you all the data, but even some of this information carries significant weight in analysing the performance of the investee.
Digital/streaming data
This type of information is responsible for the online activity of the main company/production website, social networks, information in the media space. In the modern world it is an important part of life of every enterprise. On the interest of the consumer depends on the popularity of the product, and therefore the growth of the brand itself. This data cannot be overestimated. If a company has any presence in the online space, digital information should be included in the analytical process.
Satellite/geolocation data
Another type of important insider information is geolocation. Satellite data allows you to study interest in retail outlets by getting information on the movement of customers. You can also study production activity, find out at what time deliveries occur, when and by what routes finished goods leave, what growth or decline in production occurs in a particular period. All data is transmitted in real time. You are literally present in every shop, in every factory, next to every lorry of the company that is the object of investment.
Important! The data is transmitted regardless of the country where the object is located. You can keep your finger on the pulse even if you are on another continent. However, to access some information, you need to connect openvpn. This is due to geographical and political blocking of content from certain countries.
What is the reason for collecting alternative data?
The main reason for collecting alternative data is to obtain exclusive information that complements the investment strategy to achieve the best results. They make it possible to achieve a stable profit generation process, timely exit or entry into the process.
Currently, they have a significant impact on insurance companies, hedge fund activities. More than 65% of the financial sector is actively applying alternative data in their activities. Based on the results of the conducted research, we can conclude:
77% of U.S. investment houses integrate data into their operational flow.
In Britain, there are 49 per cent of homes using a modern approach to investing.
In the banking industry, 75 per cent of executives see the ability for users to obtain investment data as a major challenge.
By analysing all related information, you can make a significant difference in the development of your portfolio.
How do you find public alternative data?
After exploring this amazing opportunity, the question becomes how to start looking for alternative data. There are several effective methods of gathering quality and correct information that will truly open up the investment process from a new angle.
Familiarise yourself with the two most common options:
Automated collection.
You can use parsers that allow you to monitor and collect all data automatically. This solution is zero-code. The system outsources hardware, software, and technical team tasks to a third party.
Prepared data sets.
The user receives prepared data sets. The information is clustered and constantly updated. Thanks to this, having heard any recommendation, in a couple of hours you will be able to get real data concerning it. This will allow you to effectively make a portfolio and play on the market on favourable conditions. Such an opportunity can be compared to a chance to look behind the scenes of the theatre. You will see not only what they want to show you, but the real state of affairs.
How do investors use alternative data?
How you use alternative data depends on the type of data and your goals and ambitions. In particular, the process of applying the information will depend on the type of investment. The application process may be different for private and public investors.
Private investors
Private investors have fewer requirements and are not required to provide quarterly reports. This unleashes alternative information and its active application. Data helps not only to run operations but also to provide effective advisory services for strategic business decisions.
Public investors
Public investors – listed companies or buy-side entities, equity research companies. Alternative data can be used by data processors, investment funds, quant funds, hedge funds and others involved in the financial process.
In this segment, information obtained through alternative means can be used for several purposes:
Increase confidence in your investment strategy. Back up your hunches with real data to gain the confidence of your peers and inner peace of mind.
To integrate datasets into the current workflow. Even a small piece of information can have a big impact on the strategy and design of the financial engagement process itself.
For the purposes of finding digital inflection points.
Real-time situation tracking. The exclusive opportunity to get information even before it is published cannot go unnoticed.
Company positioning studies. Since the financial success of a company is significantly influenced by user attitudes, it is important to study not only the financial statements, but also the overall brand positioning.
Profit forecasting. Thanks to real satellite data, financial information, you can forecast the company’s profits, and in fact your own profits from investing in its financial system.
To assist in the decision-making process at various stages.
At all times, and ours is no exception, the most valuable thing a person can obtain is information and knowledge. This is especially true in the financial sector, where success depends on the smallest details. We all know stories about the cancellation of entire corporations due to unsuccessful marketing moves, the decline of companies due to late deliveries and the like. Now you can research the market and all its fluctuations, anticipating peak situations.
How to complement the investment process with alternative data?
By collecting alternative data, you get a pile of information, every line of which can be incredibly useful. Once you have the data, the process of integrating it into the investment process begins. At this stage, it is important to emphasise a few key points.
Alternative sources do not replace classic methods of strategy building. They merely supplement the company’s proven process of generating company data over the years.
You get additional cues that allow you to adapt to a changing environment. It’s like the weather forecast telling you to take an umbrella with you on a walk.
After studying the data, you may not need to change your existing strategy if you are happy with it. You may get new ideas and open a new investment direction based on fresh information.
In this process, it is important to use mobile proxies, the price for which may vary depending on the package of services provided. Proxies help to access a large amount of information from all over the world. They are also responsible for creating privacy when interacting with different systems in the online space.
