NEW YORK (TheStreet) -- I worked as a securities analyst on Wall Street for about 20 years. My last decade on the Street coincided with the emergence of the social web. The convergence of finance, technology, and social media has changed the way investors gather and share information.
Yet, many highly effective professionals on Wall Street are unfamiliar with important online tools that can inform their investment process. These social media resources might prove helpful to a wide range of finance professionals.
- Twitter Can Be Customized To Suit the Needs of Financial Users. Twitter (TWTR) has an undeserved reputation as a microcosm of gossipy celebrity chatter. In fact, corporate executives routinely share useful insights on Twitter. Equity research analysts are also using Twitter to track the field work of trade journalists, and to share the findings of their own research channel checks.
- New SEC Rules Have Prompted More Companies To Tweet to Investors. In April 2013, the SEC affirmed that companies can use Facebook (FB) and Twitter to announce new information to investors. Zillow (Z) became the first corporation to take earnings conference call questions on Twitter. At about the same time, Zynga (ZNGA) announced that it may begin to communicate material information on Twitter and Facebook.
- StockTwits Has Evolved into a Vibrant Idea-Sharing Community. StockTwits pioneered the now widely-used "cashtagging" convention: social media messages pertaining to stocks are tagged with a dollar sign, followed by a stock symbol (e.g. Apple (AAPL) as $AAPL). StockTwits, and its community of more than 300,000 members, offers a conveyer belt of stock and market news, observations, and opinions. Cashtagged messages are readily searchable by its users.
- The Wall Street Consensus Is No Longer the Only Earnings Game in Town. Estimize aggregates earnings forecasts from sell-side analysts, buy-side investors, private investors, and students. The estimates on Estimize have proven to be more accurate than brokerage industry consensus forecasts about 70 percent of the time. Estimize attributes this accuracy to the professionally diverse composition of its membership base.
- Social Media Platforms Can Be Used in "Read Only" Mode. Brokerage firm employees may not be permitted to transmit messages on social media platforms. However, using Twitter, StockTwits and other social media Web sites in a "read only" format could enable securities professionals to stay on top of news, market developments, and changes in investor sentiment, without running afoul of their firms' compliance rules.
- Online Trading Has Taken on a Social Dimension. Some online brokers now enable investors to engage in "social trading" by "piggybacking" on the transactions of traders whom they wish to emulate. eToro's "CopyTrader" allows account holders to invest up to 20% of their account equity in the trades of other members. While few investors might be prepared to trade this way today, online trading platforms will likely begin to incorporate more social features.
Social Media Strategies For Investing provides a detailed discussion of these, and many other, important social media and crowdsourcing tools that are available to investors and securities professionals.
At the time of publication, the author was long AAPL.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates FACEBOOK INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation."
You can view the full analysis from the report here: FB Ratings Report