With many US stocks having more than 40 analysts covering them on just the sell-side, plus a number of analysts covering the same names at hedge funds, mutual fund, etc., it is increasingly hard for analysts to gain an edge on the companies they cover. With such saturation in terms of fundamental coverage, many analysts will look at previously unconventional approaches to supplement their analysis. Some of the strategies they have turned to include the use of survey work to help confirm or uncover emerging trends for the companies they cover. Through unique survey techniques developed over several years in the practice, our colleagues over at Bespoke Market Intelligence have found this approach to be extremely useful in uncovering emerging trends for companies across multiple sectors.
While some previously unconventional strategies have been successful, the path of unsuccessful methods is littered with failures. A case in point is tracking the rankings of apps on the iTunes app store. You may recall that the on the Monday after Christmas (12/28), shares of Fitbit (FIT) rallied 3% on news that its iOS app climbed to the top of the charts over Christmas weekend. With such strength in the app, it was thought that holiday sales must have been off the charts. Given the strength in the stock on that Monday, a lot of investors took this idea and ran with it. Without even getting into the faulty logic behind this ‘research’, we would note that just two weeks later, these investors have learned a very expensive lesson. After closing on 12/28 at $29.86, shares of Fitbit have been running downhill ever since, losing 37% of their value in the process.