Interview, Fireside Chat
Investing Insights from Big Data
- A significant informational advantage is anticipated for entities capable of capturing, analyzing, and deriving insights from the rising magnitude of data creation.
- Non-traditional data sources, including credit card transactions and geolocation information, are expected to be utilized more frequently by a smaller subset of investors relative to traditional financial metrics.
- Machine learning capabilities, particularly natural language processing, are projected to enable the rapid consumption and digestion of text-based information at a scale exceeding other market participants.
- Geolocation data trends are forecast to confirm the severity of the economic slowdown, with apparel retail foot traffic expected to be down approximately 75% this spring relative to the previous year.
- Sector performance during the lockdown period is expected to show drops of 84% for casinos and gaming, 79% for department stores, 63% for hotel resorts, 85% for movies and entertainment, and 80% for leisure facilities.
- Beneficiary sectors during the lockdown in April and May are projected to include food retail up 25%, home improvement up 26%, and hypermarkets/supermarkets up around 15%.
- Web traffic trends are expected to mirror physical foot traffic, with educational services seeing traffic increase upwards of 80% and interactive home entertainment rising 40%.
- Continued declines in web traffic are expected for airlines and hotel/cruise line resorts down 70%, and casinos and gaming down 40% based on contemporaneous data.
- Alternative data is expected to provide more frequent, real-time insights with greater predictive forecasting power compared to traditional fundamental data, which tends to be reported infrequently and lag behind current events.
- Market-moving impacts are anticipated from upcoming events such as the U.S. presidential election in a few months, alongside past geopolitical shocks like Brexit or natural catastrophes, driven by uncertainty rather than immediate fundamental changes.
- An investment framework established in January 2020 is designed to quantify and systematize portfolio sensitivity to a pandemic by evaluating revenue exposure to China, unique customer/supplier relationships, subsidiary locations, and industry susceptibility.
- The portfolio management approach aims to achieve neutral exposure to a constructed "COVID factor" basket to neutralize or immunize the portfolio against outsized exposure to COVID.
- The strategic focus is explicitly on diagnosing and quantifying sensitivity to pandemic events rather than placing a directional bet on whether the event is significant or not.