Diving Deep into Data for Actionable Insights

2018/01/08
Diving Deep into Data for Actionable Insights

Summary

Investors who know where to look can find a wealth of online data to “mine” for insights – from Amazon’s price points to consumers’ tweets about Apple’s iPhones. Our Grassroots℠ Research team is scouring these and other “alternative” data sources as part of our proven approach to active investing.


Key takeaways

  • Our Grassroots℠ Research team is finding new ways to mine publicly available “alternative” data sources for investment insights
  • We compared thousands of data points from Amazon and other retailers to help our portfolio managers better understand companies’ pricing models
  • Analyzing thousands of tweets about Apple’s iPhones helped our investors understand consumers’ preferences and estimate product sell-through

For more than 30 years, our GrassrootsSM Research team – Allianz Global Investors’ proprietary in-house research division – has aimed to help our investment professionals identify stock and sector trends before our competitors do. Used in conjunction with our firm’s traditional fundamental research capabilities, these GrassrootsSM insights form a key part of AllianzGI’s distinctive approach to active investment.

Recently, our GrassrootsSM team has added innovative new tools to our information-gathering toolkit. In addition to conducting one-on-one in-depth interviews with industry experts, and running detailed surveys of consumers that reach across multiple regions, we have been exploring new ways of extracting “alternative” data sets from the web.

Going deeper with the data

Broadly speaking, alternative – or non-traditional – data sources can consist of anything from credit-card data that can be “mined” for underlying shopping trends, to social media sites that can be “scraped” for shifts in consumer opinions. More of this data is available to investors than ever before, and much of it – particularly web data – exists fully in the public domain.

With so many places to turn for answers, the real challenge is knowing where to look, what questions to ask and how to analyze it to glean useful insights. This is where our GrassrootsSM team’s experience running more traditional market research studies comes into play. By working collaboratively, our researchers and investment professionals can select which types of alternative data would be most relevant to – and appropriate for – a portfolio manager’s investment process. Here are two examples.

Price-point research using data scraping
As the world’s largest ecommerce company, Amazon.com publishes an unprecedented amount of publicly available web content. To gain insights into retail pricing models, our GrassrootsSM team pulls thousands of data points to compare the prices of products offered by Amazon against the same products offered by other online retailers. You may be surprised to learn that Amazon is not always the cheapest option: many times, a company will make its own product available for less on its own company-branded site. Conducting such a thorough price comparison helps our investment professionals better understand how specific retailers are positioned against the significant online threat from Amazon and competition from other firms.

This kind of web-data extraction is also effective in comparing product rankings, studying customer ratings and analyzing consumer reviews across multiple sites.

Product-sentiment analysis using social media
To find out how consumers feel about new products, our GrassrootsSM team has tapped the power of social media – in particular, by focusing on platforms where people share their opinions in full public view.

Recently, we examined a week’s worth of tweets to detect consumers’ views on Apple’s iPhones. After searching thousands of posts and aggregating the results in distinct categories, we used specialized coding tools to sort the language into positive or negative mentions. We then assigned a confidence score based on whether the tweets were voted as positive or negative.

From our analysis, we learned that the tweets for all but one of Apple’s iPhones had an overall positive score, with a confidence level of 80%. The exception was the iPhone 8, which received an overall negative score, with a confidence level of 60%. This insight indicated a potentially lower sale rate of the iPhone 8 compared with other iPhone models, including the iPhone 8 Plus and the new iPhone X, and provided our investment professionals with a tool to help better understand unfolding consumer sentiment and estimate product sell-through .

Sifting through data for actionable insights

Gathering and analyzing data from multiple sources has always been a cornerstone of Allianz Global Investors’ commitment to proprietary research, which is an essential part of our active approach to investing.

That’s why the GrassrootsSM Research team is continually looking for new ways to mine alternative data sources – particularly the vast amounts of information publicly available online – for true insights. We also work closely with our investment professionals to test those insights in the real world through further studies and analysis.

“With the internet functioning as a massive repository of open-source data,” says Global Director of Research Gunnar Miller, “we believe that web-data extraction and other ‘big-data’ approaches are great additions to our global research platform. Finding new ways to draw investment conclusions from appropriate information sources is a natural extension of our firm’s long-standing commitment to active management.”

Some or all the securities identified and described may represent securities purchased in client accounts. The reader should not assume that an investment in the securities identified was or will be profitable. The securities or companies identified do not represent all of the securities purchased, sold, or recommended for advisory clients. Actual holdings will vary for each client. Amazon is the world’s largest ecommerce company. Apple is the world’s largest company by market capitalization.

Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

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The Risks of Relying on an Inaccurate Inflation Measure.

2018/01/08
The Risks of Relying on an Inaccurate Inflation Measure

Summary

The jury is still out on whether official CPI indices over- or underestimate inflation, but the latter would have consequences that reach far beyond consumers. Key macroeconomic data might be inaccurate, public spending could be too low and investors could suffer from the “stealth devaluation” of important assets.


Key takeaways

  • For years, consumer-price inflation has been puzzlingly low; official figures may be flawed and not reflective of actual experienced inflation
  • CPI’s key shortcomings: it isn’t a true fixed “basket”, it suffers from contentious quality adjustments and it’s biased towards higher-income households
  • If inflation is being underestimated, social security and income inequality could suffer, and risks to financial stability may increase
  • Central banks should pay more attention to asset-price inflation, and investors should consider real assets as an inflation hedge and diversifier