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 While it may be far removed from stockbrokers' traditional
balance-sheet analysis, and often less well written, traders and
fund managers are scouring online messageboards and forums to gauge
mood, morale and management success - information easily overlooked
by busy investors.
One of these troves of gossip has been Tesco employee forum
verylittlehelps.com, for example, where one anonymous writer posted:
"I hope that the new boss takes this opportunity to ensure that
systems are worked properly. Stock is written off. Staff are
employed. Waste is recorded. Shelves are filled."
That does not mean investors will take these comments at face value
without filtering them, but there is a sense that unofficial sources
and social media are being taken more seriously as a way to go
beyond broker research and company disclosure.
"In general, I think it's a very good idea to look at employee
opinions which will give you inside information that you would not
get from banks' research notes, but you would have to be careful to
filter out the noise," said Hendrik Klein, head of Swiss high
frequency trading firm Da Vinci AG.
Ex-Morgan Stanley banker Emmett Kilduff, whose firm Eagle Alpha
helps investors analyze the Internet and Twitter for clues on the
financial market environment, said there had been growing demand
from fund managers for analysis of employee views online.
Tesco was a prominent request in the wake of its announcement in
September that it had a bigger-than-expected hole in its finances.
Tesco is conducting a probe into the matter.
Another was postal operator Royal Mail, which in March announced
plans to cut a net total of 1,300 jobs, prompting the threat of
industrial action from a trade union. Employee forums were used in
order to gauge the risk of strike action.
Even official corporate videos posted online can give investors
insight, such as those of U.S. electric car maker Tesla Motors,
whose videos were analyzed by Eagle Alpha for investors which might
have otherwise missed them.
In several of these, Tesla Motors - whose shares have risen by
nearly 60 percent since the start of 2014 - gave "behind the scenes"
tours of production lines and product demonstrations.
"Online conversations about companies like Tesco or Tesla are
increasing every day, providing valuable, real-time insights.
There's a wealth of diverse sources out there, and the buy-side
needs the full picture," said Kilduff.
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CLUES FROM WITHIN
Tesco and its rivals, such as Marks & Spencer, have been dogged by
declining market share, even though M&S this week posted its first
rise in interim profits in four years.
Fund managers said comments on the Internet by current or former
employees could offer valuable insight into such companies, although
investors would have to decide whether to believe the picture
painted by often anonymous online posters.
"What's online in some of the chat rooms can highlight issues such
as low morale in some of these companies, or maybe plans to close
stores or change suppliers," said SVM Asset Management fund manager
Colin McLean.
Both Miton Group fund manager George Godber and Artemis fund manager
Tim Steer said they used Eagle Alpha's services, with Godber
describing its Tesco analysis as "enormously insightful."
McLean said that while such information gleaned from the Internet
would add anecdotal evidence on top of the more traditional,
fundamental research into companies undertaken by fund managers, it
could still be used to traders' advantage.
"It would add color to something", he said. "I would not be
surprised if some of the bigger hedge funds have systems in place to
analyze such information."
(Reporting by Sudip Kar-Gupta; Editing by Lionel Laurent and Toby
Chopra)
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