Investment decisions can make or break the bank for certain businesses, such as hedge funds. Hedge funds often deal with high-risk investments which have a potential for large capital gains. Therefore, while finalizing a decision on investment, it is essential that the investors use an informed and holistic approach where they can use as much information as possible.
While traditional information sources such as magazines, journals and printed documents can help, investors can also go a step ahead and make use of alternative data collected with web scraping.
What is web scraping and how can it help hedge funds?
Alternative data refers to data which is outside the realm of traditional sources: environmental data, satellite imagery, social media content etc. The process of collecting this data from the internet is called web scraping. It pulls out data from online pages which are publicly available.
Hedge funds can use web scraping to get all the information which can help them assess the future of the company’s performance and value. They can then use this information to conduct predictive analysis. There are several ways in which web scraping can help hedge funds reach productive decisions:
A good place to start would be to see the sales and retail data of the company which a hedge fund is considering investing in. Checking its sale, any changes in prices and the responses to it, and inventory information can help. It will also be better to go on platforms, such as Amazon and Walmart, to see the retail information to make decisions rather than using only the figures provided by the company.
For instance, Eagle Alpha combined information from web sources and declared that Lululemon would lose its sales in yoga pants as the interest in the product by the public was wearing off, soon after the company confirmed its drop in sales which affected the stock prices.
Another way to check how successful a company is or how much potential it holds is to check its web traffic. Depending on the nature of the business, a lot can be predicted by the trends in a company’s web traffic such as its popularity and reach.
Social media content
Scraping social media content can help in understanding people’s opinions and perceptions about products and companies, which can help hedge funds understand beyond the sales and quantifiable performance of a firm.
For example, a firm may be doing well in sales in one quarter, but due its shift in political stance can lose sales in the next quarter and hence also lose its value in stocks. In some cases, activity on Twitter has resulted in the stock prices changing by few percentage points, as was when Bitcoin’s value increased by 20 percentage points because Elon Musk added #bitcoin to his Twitter bio in 2021.
Web data integration
Web data integration uses data extraction but goes a step beyond as it combines all the information into a single cohesive workflow. It not only extracts the data but also makes it readily available in more interactive and easy-to-understand forms, such as charts and graphs. It is a highly automated process and can help save time for investors. If you want to learn more about it, you can check our comprehensive article on web data integration.
If you need help in choosing a web scraper, we can help:
This article was drafted by former AIMultiple industry analyst Rijja Younus.
Cem has been the principal analyst at AIMultiple since 2017. AIMultiple informs hundreds of thousands of businesses (as per similarWeb) including 60% of Fortune 500 every month.
Cem's work has been cited by leading global publications including Business Insider, Forbes, Washington Post, global firms like Deloitte, HPE, NGOs like World Economic Forum and supranational organizations like European Commission. You can see more reputable companies and media that referenced AIMultiple.
Throughout his career, Cem served as a tech consultant, tech buyer and tech entrepreneur. He advised businesses on their enterprise software, automation, cloud, AI / ML and other technology related decisions at McKinsey & Company and Altman Solon for more than a decade. He also published a McKinsey report on digitalization.
He led technology strategy and procurement of a telco while reporting to the CEO. He has also led commercial growth of deep tech company Hypatos that reached a 7 digit annual recurring revenue and a 9 digit valuation from 0 within 2 years. Cem's work in Hypatos was covered by leading technology publications like TechCrunch and Business Insider.
Cem regularly speaks at international technology conferences. He graduated from Bogazici University as a computer engineer and holds an MBA from Columbia Business School.
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