In order to be successful in the market, investors need to have an edge, utilizing the most relevant and powerful resources available. This could mean fresh strategies, experimental models, and of course, new and emerging information sources. While there a number of useful and reliable information sources that are universally implemented on a daily basis, their ubiquity implies a zero-sum game. Investors must always stay current with the shifts that will shape the future of the trading landscape.
Currently, a data revolution is upon us. More data is being collected each day than ever before, and an astronomical amount of information is being produced every second. With this new shift comes opportunity for investors. Alternative data is information that has not been previously used in the finance industry, but can be used as an input to investment decision making.. Whether it’s consumer behavior, business intelligence, industrial metrics, the Internet of Things or satellite imagery, the datafication of society has given us a bottoms up, near real-time view of the economy.
Despite the fact that many companies are producing this data, not all are actively distributing it. In fact, many don’t even know the true value of their asset. However, this is a practice that’s sure to rise in popularity in the near future. In much the same way that stock prices, stock histories, and fundamentals evolved from being largely untapped to fully diffused and widely available, raw and alternative data sources will eventually become fully commoditized, and a necessity. In order to take advantage of alternative data’s current position within the information landscape as an alpha-generating source, investors should act now, and start with the low-hanging fruit.
Where to Look
In the Farming and AgTech industries, companies like Farmlink, Granular, Farmobile, and even John Deere are utilizing devices with internet connectivity and data-collecting capability to help farmers more accurately determine crop health, yield potential, and treatment practices. This technology could potentially provide insight into the health of the industry as a whole in near real time. This assumes that fair data sharing and aggregation practices will be agreed upon, which has yet to happen. In the meantime, weather data provided by satellite and infrared can also reveal crop health. These processes are currently providing insights for companies like Tellus Labs and Descartes Labs.
Within the field of Manufacturing and Business Operations, companies like Cisco, Bosch, and GE have begun using devices with IoT capability to increase efficiency within their supply chains. With large, orchestrated production processes, knowing about something as simple as a single delayed shipment could provide investors with a window of opportunity. Data that comes from within this industry has the potential to give insight into the health of huge, publicly traded companies, empowering investors to react swiftly, before their competitors.
There are a number of additional industries that investors could benefit from researching in order to determine how alternative data is being produced and collected in order to generate insights. This infographic details a taxonomy of alternative data, which highlights ten industries that would be excellent starting points for an investor’s foray into this emerging space.
Quandl the premier source for open, commercial, and alternative datasets, serving investment professionals. Quandl offers essential core financial and economic data alongside a suite of unique, alpha-generating alternative datasets.