Social media isn’t only for connecting with clients and prospects, according to an expert panel speaking at a CFA Society Toronto event on Wednesday, it’s also a means to track current and potential investment opportunities.
“The fact is when certain people and influential [individuals in the] financial community tweet, things move,” said Jaime Widder, a sales manager with Bloomberg LP, who was a panelist at the event.
Not only do markets and stocks move, following the right company or people on social media can give you insight into that organization. For example, many executives are now on Twitter or LinkedIn so as to engage directly with their consumers and investors. Said Widder: “I can connect with the CEO without having to have someone get me in front of the C-suite office.
As well, Twitter is a useful tool to monitor current and potential investments during earnings seasons. Simply by typing a dollar sign and the ticker symbol of a company ($LNKD) you can keep track of all the relevant tweets for that investment. “The instant [the company’s earnings are] out someone will tweet about it,” said Barbara Gray, equity analyst and founder of Brady Capital Research, who was also a panelist at the event.
In addition to keeping up to date on the latest news, social media is playing a bigger role in the evaluation of a company’s risk profile. “It’s a tectonic shift that’s happening,” said Gray, “and I don’t think most investors realize it’s happening yet.”
According to Gray, companies with positive social capital will have a lower risk profile than those with negative social capital. Social capital is created through a company’s interaction with consumers through social media platforms.
For example, an airline that responds promptly to a customer complaint of a cancelled flight and that helps the individual resolve the problem creates positive social capital. On the other hand, a company that ignores legitimate complaints – not rants – from customers on social media risks tarnishing its brand and thus its social capital.
Furthermore, more companies, such as Uber and AirBnB Inc., are basing their entire business models around social media leading to change within their respective industries.
“Companies are basically using social tools to create new business models which are disrupting old business models,” said Gray. “And that’s why the risk profiles of companies are changing – and it’s huge.”