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Tradestreaming Cascade: The News You Need To Know (Week Of October 23, 2011)

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Every week, I send out an email (free) to my subscribers summarizing the must-see events of the past week. It’s everything about the intersection of technology, social media and investing.

Sign up in the sidebar, at the end of this post, or by going here.

You’ll get your 1st issue on Sunday.:::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::

Investment Products

Online banking keeps customers on hook for fees (NYT)
October 16, 2011

Big banks are struggling and their taking it out on their customers.  How long will the currently banked continue to put up with this?  BankSimple +1.

Social Media, Technology and Investing

The optimal software free trial strategy (SSRN)
Posted October 4, 2011

Lots of new investment startups and newsletters employ a free trial strategy to increase paid conversions.  Do you go full features for X days or limited features forever?  Here’s the optimal strategy.

The fear index based on social media sentiment looks bullish (MarketPsych)

Research firm MarketPsych has been profiled on Tradestreaming (go here).  Looking at a variety of investor sentiment from thousands of sources, MarketPsych thinks the current market looks bullish.

New app is awesome showcase of stock market data and visualizations (Xignite)
Posted October 14, 2011

StockTouch is a new iOS app that uses a market heat map-type display of breaking stock market movements.  New visualizations like StockTouch promise investors a new way to look at market data/info to aid decision making.

Investment Strategies and Research

Continue reading “Tradestreaming Cascade: The News You Need To Know (Week Of October 23, 2011)”

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Replicating activist portfolios is tough

Joe Light at the WSJ did a good job over the weekend analyzing portfolios of activist investors and whether they are good candidates for piggyback investing (ie, cloning, replication).

The idea would be to invest in a portfolio of securities held by a particular activist investor by following their 13-F, 13-D public filings.

I’m quoted in the article, as are the usual suspects on the subject (AlphaClone, Todd Sullivan).

The article brings some interesting research to light:

One 2008 study by Duke University professor Alon Brav and other researchers found that an investor who constructed an equally weighted portfolio that bought activist targets a month after the initial filing, and held it for three months afterward, beat the market by more than one percentage point a month, on average, after adjusting for risk and other factors. But Prof. Brav notes that the outperformance disappears if all of the conditions aren’t met.

Research in 2007 by Harvard University professor Robin Greenwood and then-student Michael Schor found that companies that become the target of an activist are more than twice as likely to be acquired within a year than companies that aren’t targeted. The targets that were ultimately taken over had risk-adjusted returns 15% and 20% better than the overall market—but companies that missed the boat didn’t have any outperformance.

In spite of the research, the article concludes that replicating the portfolios of activist investors can pay off but it’s hard citing the volatility around changes in positions and the holding period.

Other hedge fund strategies (like most popular positions among multiple hedgies, best ideas, newest holdings) replicate much better.

Read the article

Investing with Carl Icahn (WSJ)
October 22, 2011