This is literally just open source “Alpha Capture”, Marshall Wace run their TOPs strategy in a similar but much more sophisticated manner (private data), this would just be a very low dimensional data source against many. Do some googling as do many other hedge funds for their relative interest in the space. I doubt if there is much edge to be had here now based on just price targets. Also OP most Sell-side equity research is garbarge and merely serves as marketing for the analysts institution.
Have fun and all but I doubt this is going to give you a durable strategy or market edge.
I'm not sure if any sell-side analysts would join this service. The sell side and the buy side have their own ecosystem, and they are highly unlikely to share information such as target prices with third parties. The sell-side analyst writes a research report, the firm he/she works for spams it out to buy-side clients and then the analyst gets on the phone and starts calling those clients to talk about the report. If the sell-side analyst is lucky, the buy-side client will then put a large trade through with the trading desk at the sell-side analyst's firm. If this happens frequently, the analyst is handsomely rewarded at bonus time.
Echoing phyalow's comments, most sell-side research is indeed garbage. Target prices are often today's price plus 15-25%. Then the analyst massages his/her EPS or EBITDA estimate and P/E or EV/EBITDA multiple so that the target price is plausible. Most larger companies provide earnings guidance, so the analyst will stay within the guidance range and apply a plausible multiple to arrive at the pre-determined target price. The analysts are all afraid of going out on a limb and making a bold call, so before publishing research they run over to the Bloomberg terminal to check the target prices and estimates of other analysts covering the stock, and then adjust their targets/estimates accordingly.
The real value of sell-side research to a buy-side client is being able to get on the phone and talk to someone who is very knowledgeable about a stock. If a buy-side client is getting up to speed on a company, it is very valuable to call up a sell-side analyst and get a full rundown of all the issues about a stock.
Also, although almost all sell-side analysts are bulls, some are more bullish than others. So one of the keys to getting value out of sell-side research is reading at least five years of an analyst's coverage of a company and learning to read between the lines. You may realize that Brooke the Bull is always optimistic and promotional, but after this most recent earnings report, you may sense that she is slightly less bullish than usual, even if her target price is still double the latest closing price. This would be your intel that it wasn't a great quarter.
I like this idea. There's at least one system I know of in competition with your business model. In trading desks, the data of traders is analyzed ato reveal the better traders. Almost always it's because they have some kind of 'inside' information. Can be a small thing like a friend that works somewhere keeps giving them tidbits. Legal or not, this is reality. The finance companies take this internal trading data and build models based around those traders, and sell the trade advantage to their own customers.
I think your site needs to compete with that, and other existing systems for adding value to 'better traders'.
Man this looks incredibly ripe for abuse. I don't know how, particularly, just that policing this will be tough because the intensity of interest in gaming/cheating such a platform will be overwhelming.
This is literally just open source “Alpha Capture”, Marshall Wace run their TOPs strategy in a similar but much more sophisticated manner (private data), this would just be a very low dimensional data source against many. Do some googling as do many other hedge funds for their relative interest in the space. I doubt if there is much edge to be had here now based on just price targets. Also OP most Sell-side equity research is garbarge and merely serves as marketing for the analysts institution.
Have fun and all but I doubt this is going to give you a durable strategy or market edge.
I'm not sure if any sell-side analysts would join this service. The sell side and the buy side have their own ecosystem, and they are highly unlikely to share information such as target prices with third parties. The sell-side analyst writes a research report, the firm he/she works for spams it out to buy-side clients and then the analyst gets on the phone and starts calling those clients to talk about the report. If the sell-side analyst is lucky, the buy-side client will then put a large trade through with the trading desk at the sell-side analyst's firm. If this happens frequently, the analyst is handsomely rewarded at bonus time.
Echoing phyalow's comments, most sell-side research is indeed garbage. Target prices are often today's price plus 15-25%. Then the analyst massages his/her EPS or EBITDA estimate and P/E or EV/EBITDA multiple so that the target price is plausible. Most larger companies provide earnings guidance, so the analyst will stay within the guidance range and apply a plausible multiple to arrive at the pre-determined target price. The analysts are all afraid of going out on a limb and making a bold call, so before publishing research they run over to the Bloomberg terminal to check the target prices and estimates of other analysts covering the stock, and then adjust their targets/estimates accordingly.
The real value of sell-side research to a buy-side client is being able to get on the phone and talk to someone who is very knowledgeable about a stock. If a buy-side client is getting up to speed on a company, it is very valuable to call up a sell-side analyst and get a full rundown of all the issues about a stock.
Also, although almost all sell-side analysts are bulls, some are more bullish than others. So one of the keys to getting value out of sell-side research is reading at least five years of an analyst's coverage of a company and learning to read between the lines. You may realize that Brooke the Bull is always optimistic and promotional, but after this most recent earnings report, you may sense that she is slightly less bullish than usual, even if her target price is still double the latest closing price. This would be your intel that it wasn't a great quarter.
I like this idea. There's at least one system I know of in competition with your business model. In trading desks, the data of traders is analyzed ato reveal the better traders. Almost always it's because they have some kind of 'inside' information. Can be a small thing like a friend that works somewhere keeps giving them tidbits. Legal or not, this is reality. The finance companies take this internal trading data and build models based around those traders, and sell the trade advantage to their own customers.
I think your site needs to compete with that, and other existing systems for adding value to 'better traders'.
Man this looks incredibly ripe for abuse. I don't know how, particularly, just that policing this will be tough because the intensity of interest in gaming/cheating such a platform will be overwhelming.
Acknowledge that a platform like this will be a target for gaming. Please try to break it and tell me how you did it.
- i ll give you an even better idea
- find all the YT videos that talk about trading
- find all their predictions and the time on their video when the prediction was made along with the stock
- find today s time and evaluate whether the prediction was good or bad and how much profit / loss in percentage
- create a coinmarketcap type website of all YT channels sorted in descending order of how many good / bad predictions and percentage gain / loss etc
- would be a wild freaking website and the idea could be extended further to blogs
Signing up and publishing random price targets gives you a 1% chance of being a top 1% analyst :)
Relevant XKCD:
https://xkcd.com/525/