seeking alpha See how everyone shines

Seeking Alpha—See how the wisdom of the crowd shines

Weiyang Research | Weiyang.com 2015-03-19

Seeking Alpha is a company established in the United States in 2004 An investment research platform based on the wisdom of the crowd, it mainly provides investors with research articles and investment strategies on stocks, various asset classes, and ETFs. The so-called Wisdom of Crowds means that all analysis and research articles on Seeking Alpha come from public submissions and there are no special writers; public readers verify their investment opinions and gain insights through discussions and exchanges with other users of the platform. It provides investment strategies and is a platform that comes from the public and serves the public. As of the end of June 2014, Seeking Alpha*** had 9,000 writers and 3.5 million registered users; it published an average of 5,000 articles per month, with 120,000 comments, and had made investment analysis on 7,327 stocks. It can be said that It is the largest investment research platform in the United States.

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1. Seeking Alpha--a new model that breaks the rules

Seeking Alpha was founded by David Jackson in 2004. Before that, he As a technical research analyst at Morgan Stanley for 5 years, he once said about the creation of the platform, "A few years ago, some serious investors did not know how to manage the stocks in their hands because they did not know that other smart people were How do you view this stock? The emergence of Seeking Alpha makes this situation possible. "Indeed, the emergence of Seeking Alpha has challenged the traditional investment research market, allowing investors to publish research articles and discuss freely for the first time, which is a break from the norm. A new model for the industry.

1. Traditional investment research

Traditional investment research articles are usually written by analysts from major institutions, of which Wall Street securities analysts are representatives. They conduct research on the company through Analyze various situations to determine the company's value and give buying and selling recommendations. The security analysis industry has a long history. Benjamin Graham's book "Security Analysis" published in 1934 laid the foundation of the industry and made security analysis an important part of the capital market.

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Analysts are also called the sell side in the investment market. They mainly work for the research institutes of investment banks and some independent institutions. They are research analysts. They only provide research articles on how to buy and sell stocks, but do not practice actual operations, and are not responsible for the trading results. Opposite to the seller, there is the buyer (buy side), usually an institution such as mutual funds, hedge funds, insurance companies, pension funds, etc. The buyer actually buys and sells stocks and is responsible for his own funds.

2. New Seeking Alpha

Seeking Alpha’s investment research model based on the wisdom of the crowd is known as "The Future of Equity Research". The work of analysts creates challenges. Although both companies provide research articles, Seeking Alpha's research articles are provided by irregular writers, and investment opinions are also provided by the public; while the articles written by stock analysts are mostly the opinions of one person. Although the research articles of Wall Street securities analysts are of good quality and provide financial model scenarios and company management information, they lack excellent investment opinions. This is caused by many reasons: First, the job of sell-side analysts is not to make money for clients; do research so that they have less incentive to think and make the right decisions; secondly, the analyst's ability to provide information to a company's management depends on their relationship with the company, so this will also affect their impartiality. In contrast, Seeking Alpha writers are mostly buyers. They are generally investors or industry professionals looking for profit opportunities for themselves and their clients. Some writers manage millions or hundreds of millions of dollars in asset investments and spend a lot of time doing investment and investment research every day. If the people who write stock articles themselves are also buying and selling stocks, their articles may usually be useful to other investors. The speech conference has more reference value.

2. How Seeking Alpha works

Seeking Alpha’s model of gathering the wisdom of everyone seems simple, but it actually faces many challenges: How does the platform review manuscripts? How to stimulate the public's enthusiasm for submission? Can we provide users with the most comprehensive financial information while relying on contributions? This all needs to be thought about. With these questions, let’s take a closer look at how such a platform operates.

1. How does Seeking Alpha review manuscripts?

As mentioned earlier, all article manuscripts on the Seeking Alpha platform come from public submissions. To ensure the quality of the platform, it is impossible to publish every submission, so how to review manuscripts is a very important issue.

Seeking Alpha has a professional editorial team to review manuscripts. The team first reviews the article. If the article passes, it will make certain modifications and then publish it on the platform. Writers' articles are divided into two types according to their quality: quality articles and ordinary articles.

Premium articles: These are articles exclusively authorized to Seeking Alpha and must be approved by the platform’s editorial department before they can be published. Premium articles are paid to authors at a rate of $10 per 1,000 views. The article title will appear on yahoo! finance and other partner websites.

Ordinary articles: No exclusive authorization is required to Seeking Alpha, but they must be approved by the platform’s editorial department before they can be published. No payment.

The requirements for review are generally as follows:

Analytical articles on specific stocks must 1) be helpful to investors in making investment decisions about buying and selling stocks; 2) contribute to the company’s competitiveness and management Levels, products, development strategies, potential profit points or company financial statements provide meaningful information or analysis; 3) Generally speaking, pure "technical analysis" of stock or futures trading is not encouraged.

For macro direction analysis articles, they must 1) be helpful to investors in the stock market; 2) have a meaningful starting point and macro direction of analysis; 3) focus on investment in policy, economy, marketing market, etc. related aspects.

According to official statistics, about 400 articles are reviewed on the platform every day, which shows the large amount of tasks and the popularity of the platform.

2. What kind of information does Seeking Alpha provide?

Seeking Alpha has five major sections, which are:

1. Headline news and breaking news: The news in these two parts is edited and released by the platform itself, and they are short and concise news. ;

2. Popular articles and opinions: Most of these articles are submitted by the public, and there are also some Earnings Call transcripts compiled by Seeking Alpha itself. Most U.S. listed companies will hold conference calls every quarter to release their financial status to investors. The content generally includes the company's quarterly performance, economic environment, products and markets, etc. Seeking Alpha releases financial report calls of 4,500 listed companies every quarter. The minutes of the meeting will be compiled into text and published on the website within 6 hours after the conference call, ensuring 99.5% accuracy of the content. This is very timely and valuable information for platform users.

3. User’s investment portfolio: Users can create their own investment portfolio on the platform, including important news, stock prices, trends of related stocks, relevant investment analysis suggestions provided by the platform, etc., all available on the Seeking Alpha platform Resources will be displayed in the column.

4. People to follow: Seeking Alpha allows users to follow people of interest just like using Weibo. Mainly, new articles or opinions published by this person will be displayed in the column.

5. Classified articles: There are 4 types of articles subdivided here, respectively about macro trends, dividends, investment advice, ETFs and other asset portfolio strategies. Articles are also submitted from the public.

In summary, these five sections make the information on Seeking Alpha highly timely and comprehensive. Market forecast analysis perspectives that were previously only accessible to financial professionals can now be received by everyone for free on Seeking Alpha. Readers do not need to search for information about the company on various search engines again and again. Through Seeking Alpha, they can basically learn everything about the company.

3. How do users participate in Seeking Alpha?

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4. How does Seeking Alpha pay the royalties? How to make money?

How to pay the royalties from Seeking Alpha? There are two payment methods, namely pay per view and pay per article quality. If the research article is about popular stocks, the payment will be based on the number of views, and the basic payment is US$10/1,000 views; for high-quality analytical articles on small-cap stocks, the payment will be based on quality, with a minimum payment of US$150 per article. Compelling risk or reward analysis, $500 is paid. Why are there two different ways to pay royalties? In fact, before 2011, Seeking Alpha only supported manuscript fees based on page views, but the platform found that this payment method caused authors to only write about popular stocks and big companies. However, investment opportunities (unusual investment opportunities, α) usually occur in less popular stocks, which goes against the original intention of Seeking Alpha. Therefore, the platform adds a new payment model. The fee depends on the quality of the article rather than the popularity. degree. According to the vice president of Seeking Alpha, Seeking Alpha pays a monthly fee of US$270,000, of which US$150,000 is paid for page views and US$120,000 is paid to ensure the quality of the article.

3. The wisdom of the crowd shines in Seeking Alpha

1. Seeking Alpha in the spotlight and the wisdom it gathers

Seeking is based on the wisdom of the crowd Alpha attracted much attention in March and April this year, because both the Wall Street Journal and Bloomberg published relevant reports. The content was that Seeking Alpha’s collective wisdom defeated Wall Street analysts, which caused heated discussions for a while. Where does this statement come from? The root of this is an article published in Review of Financial Studies, a top journal in finance. This article was co-authored by four scholars from City University of Hong Kong, Purdue University and Georgia Institute of Technology. The title of the paper is "The Wisdom of Crowds: Stock Investment Perspectives" Wisdom of crowds: the value of stock opinions transmitted through social media. This article analyzes whether the wisdom expressed by social media is useful and accurate, and takes Seeking Alpha as the research object, analyzing 97,070 articles and 459,679 related comments on the platform from 2005 to 2012. The authors of the paper collected negative words from articles and opinions about a specific stock on Seeking Alpha on a certain day, and then tracked the performance of this stock over the next few days and found that it performed worse than similar stocks. The author said that he cannot conclude that the views on a certain stock on Seeking Alpha will affect the future direction of the stock, but at least he can predict how its performance will compare with similar stocks. The author later concluded that Seeking Alpha's articles and comments can predict stock price trends more accurately than Wall Street analysts predict.

Although this summary is somewhat arbitrary and arouses disdain from most analysts, in terms of the overall direction of the paper, the results are similar to the results of previous articles, that is: the wisdom of everyone makes decisions correctly. Sex is no less than expert. As another paper discussed: Wikipedia is no less accurate than Encyclopedia Britannica.

2. The wisdom of the crowd is indeed trustworthy

Is the wisdom of the crowd really trustworthy? Let’s go back to the source to find out. In fact, there was an experiment about the wisdom of crowds as early as 1906. At that time, a statistician invited 800 people to participate in an experiment to guess the weight of a cow carcass. The final average was 1,207 pounds, which was only 1% away from the cow’s true weight of 1,198. . Although this experiment is simple, it has verified the reliability of everyone's wisdom to a certain extent. In recent years, because the Internet and media can easily and quickly gather the opinions and voices of the people, the wisdom of the people has become a topic of discussion among scholars.

According to a 2010 survey by AutoNavi (a company engaged in information technology and data analysis), consumers no longer rely on expert opinions and have begun to pay more and more attention to other products when choosing products. Consumer suggestions, and the emergence of social media has made this trend more and more obvious. For example, 82% of US Internet consumers said that they would be influenced by other buyers’ reviews when purchasing products. At the same time, according to a 2010 article by Datamonitor (a company that provides market research and data analysis), the influence of public recommendations on websites such as Yelp and Amazon is gradually expanding, while traditional recommendations such as the Michelin Guide (a travel and dining publication published in France Accommodation Guide, a century-old guide) whose influence is gradually waning.

Not only in catering and shopping, the wisdom of the crowd is also affecting the financial market. According to Brunswick’s 2014 investment industry survey, 70% of people believe that digital media represented by Seeking Alpha will play a greater role in future investment decisions. Although a company's own information is the most important basis for investors and analysts to make investments, the influence of digital media is increasing day by day. A quarter of people said they have made investment decisions based on websites.

3. The increasingly influential Seeking Alpha

Today, the influence of Seeking Alpha is becoming increasingly powerful. Its CEO once said that during one of his business trips abroad, he came into contact with Almost all people in the financial industry use Seeking Alpha. Let’s take a look at the following set of data:

Seeking alpha*** has 540,000 Weibo posts, 11,000 private blogs, 500,000 research articles and 4.8 million comments; it has 3.5 million registered users. 13.9% of users are financial experts, 9.2% are buyers of Internet financial products, more than 50% of users will comment and interact below articles, 86.5% of users have experience in buying and selling stocks, and 17.6% of users are corporate senior For managers, 77.2% of users have a bachelor's degree or above, and 44.2% of users have a master's degree, which is higher than other platforms.

It can be seen that Seeking Alpha is widely used. Most of its users have investment experience and there are many financial industry professionals. It has gradually become one of the must-use websites for those working in the financial industry.

4. Seeking Alpha Controversy and Thoughts

Although the wisdom of everyone in Seeking Alpha has brought considerable development to the platform, the new model has also caused many hidden dangers to the platform. Discussions about the platform The controversy has never stopped:

1) Malicious boot?

If someone maliciously wants to manipulate the market or a certain stock in the market, will they use the platform to publish some false but very guiding information, such as maliciously guiding people to buy a certain stock or bluffing? Although the platform has an editorial department to control the quality of articles, whether it can really distinguish the authenticity of the news and the malicious guidance contained in it, and how the platform controls the intrusion of trolls are all issues that need to be considered and paid attention to.

2) Guarantee privacy issues?

This issue was raised by a lawsuit involving Seeking Alpha. In February 2014, the platform author published an article in which the author stated that he had sold shares of NanoViricides (NNVC), which caused NNVC to The company was dissatisfied and believed that the author was ruining NNVC's reputation and deliberately disrupting the company's stock price, and took Seeking Alpha and the author to court. Similarly, a similar case occurred some time ago because a writer on the platform inadvertently revealed that a large investment company was preparing to acquire a small company. The disclosure of the news attracted full attention from all parties and led to the failure of the acquisition. Although Seeking Alpha won these two lawsuits, the issues involving company privacy and fairness are worthy of people's consideration. How the platform can gather everyone's voices while ensuring everyone's privacy, and how to control the laxity of article review is the key.

No matter how many uneasy factors and controversies there are in Seeking Alpha, the platform’s use of public wisdom in financial investment has always been a major innovation in the industry. In the alternation of old and new and constant exploration, the team of Seeking Alpha will become more and more popular. We have more and more experience and ability to deal with various problems arising under the new model. We hope that we will eventually see the perfect combination of social and finance.

GELP