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Alternative Investments
How Smart Investors Use Alternative Intelligence Data to Discover Opportunities
Ashok Sharma
March 8, 2022·5 min read
Investors these days need all the edges they can get. Information is widely available, and there is no shortage of smart competitors ready to act quickly. Data analysis holds the key to unearthing value. Specifically, alternative data sources hold a treasure trove of information for investors willing to look into them.
Every business has established a digital presence these days. In addition, the majority of consumer activity occurs online too. As a result, investors must consider web data when searching for investment opportunities. That’s why investor intelligence data now includes alternative data sets such as website traffic volumes, online partnership analysis, and content engagement metrics.
Here are four ways investors can discover value opportunities using these alternative data sets.
Industry-wide data
Industry trends can highlight valuable information for investors. For instance, a trend of decreasing margins can point to a sector that is diminishing in importance, even if individual companies are profitable. Often, such industries include value traps – companies with low valuations and high asset values. An analysis of industry-wide trends will highlight how troublesome the situation is and help investors avoid locking cash into companies that go nowhere. Investors seeking growth can also discover promising industries using metrics such as increasing digital traffic growth, rising engagement on social media, and higher search volumes, all of which often point to growth. Benchmarking an individual company's performance is also easy, thanks to industry-level data. Investors often have issues deciphering relative performance due to fluctuations in competitor performance. For instance, a long-standing competitor might become obsolete, and investors might end up measuring the wrong metrics. Industry-level data will simplify performance measurement against the average. Often, consumer trends precede valuations, and investors can quickly spot such opportunities using alternative investor intelligence reports.Consumer behavior data
A business's customers lie at the heart of its profitability. Lose customers, and the business will fall into a death spiral. These days, having a great product helps, but competitors can undercut a business using additional factors. For instance, a competitor with a strong social voice on important issues will capture their audience's pulse. This will lead to increased traffic that can result in a market-dominant position. Social media provides insights into what consumers think, and an investor intelligence report can summarize trends for analysis. Upward trending volume of likes and replies on a competitor's posts could spell trouble for a market leader. How will this company react to the challenge? Getting left behind is easy these days, due to the increasing rate of technological improvement. An investor intelligence report will clearly highlight digital trends that investors can use to predict future valuations. In turn, this helps them avoid investing based on emotional factors alone.Analyze unit sales
If a potential investment has an active eCommerce arm, reverse engineering their unit and SKU-specific sales is a relatively simple task. With enough data about traffic and conversion rates, investors can estimate sales and market dominance with a high degree of accuracy. Of course, getting access to these datasets is tough. This is where alternative investor intelligence reports shine. They highlight a company's digital activity, such as website traffic, marketing channels, consumer behavior, and unit-based sales data. Traditionally, investors use financial statements to reverse-engineer unit sales. Often, these numbers aren't accurate because of accounting obfuscations. Third-party data, however, is far more difficult to manipulate, and this gives investors deep insight into how well a company is performing. Decreasing unit sales doesn't always mean bad news. If accompanied by price rises, investors will be better off buying more of the company. Highly accurate unit sales data thus gives investors an edge in the markets by helping them discover the strength of a company's appeal to consumers.Discover partnership trends
Influencer marketing plays an important role in a company's growth these days. This is especially true in socially conscious industries. For instance, a restaurant chain that targets vegan and eco-conscious consumers must rely on influencers to boost its brand image. A trend of troublesome partnerships and partners that are not a good fit for a business highlights potential problems down the road. Alternative investor data reports can highlight partnership and affiliate data. Affiliate referral sources tend to receive less attention compared to influencer partnerships, but these situations can yield insights as well. For example, a socially conscious company might have affiliates that are using less than ethical methods of driving traffic to the company's website. These situations are ticking bombs for the company's valuation, and investors can quickly spot them. Comparing the quality of a company's partnerships with its competition is also a good way of discovering trends. A competitor that is pivoting to partnerships of a different quality deserves attention. They might be tapping into future trends or making a mistake. Either way, all of this is valuable information for investors.Alternative data spells profits
Investors have always searched for edges in the markets, and data analysis now provides them with a clear path. The key is to access these valuable datasets in easily understood reports. Investor intelligence reports now include digital activity data that investors can leverage to spot great investments.Ashok Sharma
Ashok Sharma is the Digital Strategist with more than a decade of experience in data and technology fields, and he helped businesses gain more traffic and online visibility through technical, strategic SEO and targeted PPC campaigns. Connect him on LinkedIn and follow him on Twitter for a quick chat. Follow Ashok at Twitter, LinkedIn