Friday, May 15, 2015

At Face Value, US Q1 Earnings Surprise Not Supported By Sentiment

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Earnings Picture

US first quarter earnings season is pretty much over so let’s take stock from an news analytics perspective. As pointed out by our partners, FactSet, the earnings surprise percentage so far this earnings season has been higher than average and potentially the highest since Q1 2011. Have we seen this in the news sentiment analytics?

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No. Although it has been a busy quarter in terms of media coverage of earnings and revenue events, relative sentiment remains slightly negative. That said, relative sentiment has picked up over the last couple of weeks.

Figure 1 shows the count of detections of these two event groups (the blue bars) for the US market as a whole. This measure of media attention for revenue and earnings has been the highest of the last year.
Figure 1: US Earnings & Revenue Sentiment RSIs & Media Attention

Wednesday, May 6, 2015

News Sentiment Helps Pick Turning Points In Price Momentum Factors

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Factor investing is a term in more or less every portfolio manager’s vocabulary these days, but all managers face the challenge of understanding when risk premiums associated with traditional factors can be harvested and when they can’t.

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A large corpus of academic research, spanning more than 40 years, has highlighted the existence of long-term risk premiums linked to factors such as value, low size, low volatility, high yield, quality, and momentum. For instance, the concept of Value investing is to look for stocks that have low prices relative to their fundamental value – commonly captured by a high book-to-price or earnings-to-price ratio (amongst other measures).

Friday, March 13, 2015

US Dollar’s Momentum Not Matched By News Sentiment

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US Dollar Index DXY Sentiment

Is the dollar’s strength in the last three weeks matched by an increase in sentiment toward the US economy? Not according to RavenPack’s measures of relative sentiment momentum.

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The relative strength indices of the US dollar index (DXY) – over 14 and 30 days – have extended toward or well into overbought territory, see figure 1, while sentiment momentum across all macroeconomic and geopolitical topics – which includes business, economic, social, environmental, political events – is steady just above the neutral level.

Figure 1: US Dollar Index vs US All Macro Sentiment RSI

Monday, March 9, 2015

Apple Watch Hype Has Not Lifted Sentiment

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Apple Sentiment

In just an hour, at 5pm GMT Monday, the Apple Spring Forward event kicks off in San Francisco. The new Apple Watch is expected to be on show. The media has been in a frenzy over the last week or so, speculating what the watch will be capable of, how long the battery will last and so on.

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You would’ve thought all that hype would have lifted Apple’s sentiment - which has been near flatlining for a few months now. But no, if anything it’s weighed on sentiment as you can see from figures 1 & 2, which show the relative change in sentiment vs the share price and the relative strength of Apple’s share price in figure 2.

Not much to conclude here, apart from maybe the market is expecting to be underwhelmed by the Apple Watch. Of course, there’s always the chance of Apple springing some cool surprises and that might be a catalyst to get the price moving again.

Wednesday, March 4, 2015

Adidas Sentiment Supports Optimists Ahead of Earnings

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Adidas Sentiment

Adidas shares have been on a tear since the beginning of the year and heading into Thursday’s earnings report there’s optimism that the sportswear maker will live up to its recent upbeat guidance and there’ll be an early CEO change.

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But there are sceptics given the lagging performance of 2014 which saw profit warnings and shareholder pressure for change at the top. In a research report last week Susquehanna Financial Group said it was looking for continued signs of sales and margin improvement with the latter pressured by heightened competition in the Russian and North American markets. It also intimated an external appointment as CEO would be welcome.

Well, RavenPack sentiment appears to agree with the optimists. Sentiment momentum is positive with the 90-day RSI of sentiment heading higher since the turn of the year and the 14-day RSI holding well above the longer-term measure. See figure 1.
Figure 1: Adidas Price vs. Sentiment RSIs

Wednesday, February 18, 2015

News Sentiment Not As Strong As US Earnings Season Would Suggest

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Earnings Picture

US earnings season is drawing to a close it appears over two thirds of companies that have reported so far have beaten expectations. Subsequently all geopolitical risks seem to have been ignored, apart from in passing conversation, and the S&P 500 has hit an all-time high.

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Well, here’s another angle on earnings season. Figure 1 shows sentiment derived from earnings-related articles is only slightly higher than before earnings season on a three-month view - but it’s still only around the neutral mark and not as high as it was last earnings season. There’s also been a massive drop in our 14-day measure of sentiment in the last two weeks.

Figure 1: US Earnings Relative Sentiment

Tuesday, February 17, 2015

Wal-Mart Sentiment Soft Ahead of 4Q Earnings

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Wal Mart Sentiment Soft Earnings

Sentiment toward Wal-Mart, which reports its Q4 earnings before the bell Thursday, has declined over the quarter, while its share price has seen a $10 move higher. That does not mean a negative earnings surprise, but given consensus is for Q4 EPS near the top-end of the company's $1.46-$1.56 guidance range, caution may be appropriate.

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Figure 1: Wal-Mart Price versus Relative Sentiment