The last couple of years have seen significant impact of social media on stock markets, in general, and specific stocks in particular. This White Paper explores how new-age investors can leverage various social forums and new-media sources to get an edge in the stock market.

1. The Age of Stockal Media Cometh
© Stockal 2015
In order to understand this better, let's look at a few factors which tend to impact stock
prices and see how information for each can be discovered on social media.
Index movement: Movement of any stock index is a representation of the movement of the
underlying stocks. So if you hear enough times, from enough or highly credible social sources
that the index is likely go up (or down) - making the sentiment bullish, assume that the stocks
that make up the index, and similar stocks, by extension, are equally likely to move up (or
down) as well. In order for you to discover such info, you need to be following credible social
media handles, forum threads and blogs that talk about the index.
Definition
Stockal Media = (Stock Market + Social) Media
THE AGE OF STOCKAL MEDIA COMETH
We define "Social", here, as a combination
of popular platforms like Twitter, StockTwits,
eToro, Facebook, discussion forums like
SeekingAlpha, commenting platforms like
Disqus and LiveFyre, and blogging platforms
like Tumblr, Wordpress and Blogger.
Over the past 2 years it's has been proven,
with a fair degree of certainty, that things
(news, opinions etc.) reported on social
media impact stock prices. The crucial thing
here, as a trader, is to be able to spot
whenever such information emerges.
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2. The Age of Stockal Media Cometh
© Stockal 2015
Company's Financial Health
Most seasoned investors, before making a decision to buy a stock, look at the financial
health of the company the stock represents. Did the last earnings call set a positive
mood? Does the sales pipeline or potential customer acquisition look strong? Has the
company been able to pay regular dividends? OR Is a successful CEO going to move
out? Is a potential law suit brewing against the company? Is it in discussions to make a
large acquisition? These are just some of the questions you need answers to –
constantly.
So, how do you track? Well, determine who the key executives of the company are and
follow their social handles. See if someone hints at a new customer meeting. Track
what the investor relations team of the company is telling traders on platforms like
Linkedin or StockTwits. Track the customer sentiment and chatter for the company's
products by looking at Twitter interactions between customers and the company's
social media support handles. Track what the company's representatives in technology
or industry events are saying.
Industry Outlook
A company’s stock price may go up or down depending on
whether investors and analysts think its industry is
expanding or contracting. So if a company's financial health
is fine but the industry is not growing then there's reason to
believe that the company may not be able to sustain its
growth. This is likely to lead to a fall in stock price over a
medium-term period.
So how do you know which way an industry is headed? Best is follow industry analysts,
wherever their social presence. You are most likely to find them on SeekingAlpha and
Twitter. But interestingly, a number of them blog quite heavily – such folks may not be
accredited analysts from large organizations, but they have a history of making correct
estimates when it comes to industry performances. These can be discovered through
blogging platforms, comment threads and discussion forums. It's almost certain that
they have a reasonable Twitter presence as well.

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© Stockal 2015
Economic Trends
When key economic signals point to a
healthy and growing economy,
unemployment is low, inflation and
interest rates are under control, people
have more money, they buy more and
companies are likely to make more money.
Future of companies looks bright and they
are looking to scale-up. Conversely,
negative signals indicate a contracting
economy, joblessness and therefore less
money for companies. Stock market moves
almost always in conjunction with the
predicted movement of the economy.
While some these key economic signals,
indicators – if you may, are easy to track
from federal government sources and
organized media. These are the likes of CPI
(Consumer Price Index), Gross Domestic
Product (GDP), Budget Surplus, Inflation,
Central Bank Interest Rate Federal Tax
rates and Unemployment Rate.
But since everyone has access to such
data, there is no big market advantage
that a trader can easily derive. It is
interesting, though, when you are able to
track some of the signals or conversations
which “could” predict any or all of these
indicators. For this, it’s important to know
who the opinion makers are. These could
be individuals or small think tanks or
consulting
organizations. These could also be a
combination of conversations on a
discussion forum or thread. A trader
or analyst could do well to follow
these sources of information and
analysis across social media. One can
also do a larger “mood of the crowd”
analysis to determine if the overall
sentiments are positive or negative.
For instance, if a lot of people are
happily talking about new purchases
and new jobs then it’s likely that the
economy is looking good as well. If
loan departments of banks are doing
well and their future outlook
remains positive (info you can get by
following their key people, customer
outreach handles and digital
advertising) then people are taking
more loans – and are therefore
confident of paying the same back,
indicating good jobs prospects and
continued employment. A lot of this
data and analysis can be gleaned
from networks like Facebook,
Twitter and Linkedin.

4. The Age of Stockal Media Cometh
© Stockal 2015
Geo-political Events (National & International)
Quite often, it has been seen that news related to international events has an impact
on stock markets in general and quite often, this impact spreads across multiple
markets in multiple geographies. For instance, when a Malaysian Airlines flight was
struck down on the Russia-Ukraine border, it created a mood of global political
instability that lead to a minor slowdown in growth of stock markets and in turn, lead
to increased investments in Gold (because of the inherent stability associated with
Gold as a commodity). Similarly, if a US-based company is largely dependent on exports
to, say, the Asian market and there is unrest in a major Asian economy, the company’s
stock performance is likely to be negatively impacted.
Such information can be discovered quite easily on organized media. But it may be too
late, by then for a trader to take an advantageous position. One can follow specific
keywords on social media and lesser known websites (through search engines) to
discover useful nuggets of such information. For instance, if a major illness strikes, it is
quite likely that you’ll read about it on Twitter before reading about it on New York
Times.
Company Related Events
A key employee being hired – say a new CEO or
Sales Head. Brand receiving glowing feedback or
awards. A massive layoff. An overall
organizational restructuring. A new product
launch or new market entry. An acquisition or
new partnership. These are just some events
that have a high likelihood of impacting stock
prices.
Events like these and more can be discovered
on social media by following key employee
handles, platforms like Linkedin and Glassdoor,
Twitter handles or analysts and bloggers and
credible blogs written by employees as well as
outsiders who are enthusiastic followers of and
commentators on the industry the company
belongs to.
For more on how analysis of unorganized data can help you invest better, reach out to us at
research@stockal.com
Or follow Stockal at twitter.com/getStockal