GE is one of America's most ubiquitous household names as well as one of the country's most widely held stocks, and its trading reflects the importance of public sentiment, based on social-media trends measured by Bloomberg. While shares of Fairfield, Conn.-based GE often move in lockstep with social media buzz, investors in rivals such as Honeywell (HON) and United Technologies (UTX) seem indifferent to what's trending online.
"It depends upon how spread out the company is and how people are tweeting about it," said Aditya Sharma, an analyst with Social Market Analytics, a Chicago-based social-media analytics firm founded in 2012 to interpret the financial relevance of trending activity via platforms such as Twitter. "If you are looking at relative volume, you can see that Honeywell has much less Twitter volume than GE. The tweets have collective power, and with GE, it could be a better indicator of what's going to happen to the stock."
The patterns were evident on Friday, when GE announced second-quarter earnings about 6:30 a.m. The company noted that its industrial units -- and the finance businesses it plans to retain after selling most of GE Capital's loan portfolio -- showed significant growth, and mentions on Twitter, from news media, investors and others, spiked.
nice beat by $GE, again, nice to see— AdmiralRoadCapital (@AdmiralRoadCap) July 17, 2015
Solid print for $GE across the board.— DividendStockAdvisor (@DividendsGuru) July 17, 2015
About three hours later, when regular trading began on the New York Stock Exchange, the stock price fluctuated before beginning a steady climb.
Source: Bloomberg. The above chart illustrates how stock prices, shown by the blue line, moved in comparison with positive social media comments, shown by the green bars, when GE reported second-quarter earnings.
Trading patterns for Honeywell and United Technologies are much different than GE's, each with fairly flat curves over the past year and only moderate spikes that don't align well with social-media velocity. For example, United Technologies' shares popped by more than 6% in less than a week in early January, while social media posts were diverse among positive, neutral and bad news, based on Bloomberg data. And when Honeywell shares dipped by more than 7% last October, their spikes on social media were mostly positive and sporadic, seemingly non-event driven.
That reflects in part the power of GE's brand. The company is known to households across the U.S. for an array of products from light bulbs to stoves, refrigerators and electric fans; it has heightened consumer awareness with advertising campaigns such as "We Bring Good Things to Life" and "Imagination at Work."
A second example of how the brand feeds social media indicators is when GE shares surged in April after CEO Jeff Immelt's announcement that the company was returning to its industrial roots and winding down GE Capital.
Source: Bloomberg. The above chart illustrates how stock prices, shown by the blue line, moved in comparison with positive social media comments, shown by the green bars, when GE announced plans to sell off most of its finance unit.
It appears, in the above chart from Bloomberg, which tracks social media commentary through its Social Velocity index, that the positive buzz was spiking well before shares reached their peak for the day.
At Social Market Analytics, which also offers a social-media tracking service, findings are based on an algorithm that gauges the volume of posts on Twitter and the intensity of the sentiment expressed -- while trying to filter out advertising and fraudulent messages -- in a fraction of a second. That gives customers an edge on developments that may move financial markets, Sharma said.
"We remove the spam tweets and retweets and compare the data we have to do an analysis on the content ," Sharma said. "We use seven different metrics to understand the volume or the degree of the sentiment."
The question many investors have is whether it's too late to get in on the action when a stock's ticker starts going viral on the Web. And in the two GE cases, it appears that investors had time.
"You see there is investor sentiment and the stock price keeps on rising," Sharma said. "If you see that the sentiment is going up, that is an indicator that the price might go up because people are feeling positive about it. It is sort of a predictor of what is going to happen in the stock. If you are not taking into account the sentiment of the people, it will have an effect on your portfolio."