Help your investors trade like Warren Buffet with AI equity research
In today’s markets, company fundamentals are more important than ever. To find value when everything seems to be crashing, investors need to feel confident that they are choosing the right stock. And what can be better than looking into companies’ balance sheets and analyze their earnings reports - just like Warren Buffett does?
But… not everyone knows where to find the relevant data, let alone analyze it. The lack of information leads to anxiety, pushing many of your users postpone further trades or cash out and churn all together. When investors look at the angry-red trading day results, they feel lost. The result of this has been noticed by many Trading Platform managers and online Brokers, as they register significantly lower volumes of trades.
Why are traders deserting the stock-market battlefield?
Private investors, especially those who entered the stock market after the Covid-19 crash, thought they’ve found a sure way to get rich fast. They were convinced that the “strategy” of dumping their money into a few ETFs following S&P 500 and other wide indexes and happily watching it rise in value, would work forever. That “forever” lasted until the first market crash.
What's changed? The pandemic accelerated a lot of digital transformation, and investors, who were flush with cash from monetary and fiscal stimulus, rushed into tech, EV, digital media and other “new economy” stocks. Now, with interest rates finally rising, inflation at 40-year highs, growth slowing and geopolitical risks throwing global economy into disarray, everything just seems to be going down; screens are flashing red and many private investors feel they need to run for their lives back into cash.
The S&P 500 is down 19% YTD, marking one of the worst starts to a year in the history of US indexes. The Nasdaq Composite is deep in the bear market with a 29% loss since its high in November, while Gen-Z darling small-cap benchmark Russell 2000 has tumbled 27% from its peak.
The acute need for Fundamental Analysis
The "Everything Bubble" that has grown into gigantic proportions since the Global Financial Crisis, taking just a small break for Covid-induced crash, has burst. Now that money is flowing out of the markets, investing through indexes might not be the wisest choice. Indexes include a large number of companies, from the ones that Warren Buffet would happily hold, to the ones that “sell” their investors a promise of earnings, with a dream of future growth instead of profits. These companies are on a much less attractive trajectory than they were just 6 months ago. Meanwhile, the media is covering their crushes broadly, concentrating on mega-caps and well-known brands, adding to investors’ anxiety.
For seasoned investors, the change in the economic cycle reinforces the need to re-examine the composition of the investment portfolio and seek investment in strong, stable companies with strong cash flow that are resistant, or at least much less susceptible to changes in the markets.
Yes, we are back to fundamentals now: it’s time to look into the balance sheets and earnings reports, leaving the hype behind in 2021. However, less experienced traders find it very difficult to obtain the information in a timely manner, let alone analyze and reach conclusions related to their investment decisions on their own, particularly when the stocks they are looking at, are not covered by analysts.
There’s a way to help traders find value among the market shambles
To encourage investors to trade more, they need to be convinced first that they have enough information and decision support tools. Many Platforms and Brokers supply their traders with some research tools. However, there is mostly technical data, meaningless to non-financial crowd and insufficient as a stand-alone tool, and some human analysis, lacking in scope and time efficiency, contaminated with sell-side bias.
But there’s a way for Trading Platforms and Brokers to help their clients bridge the information gap and feel that they have gained enough knowledge to trade with confidence, while their success will increase their satisfaction with the trading service provider, leading to high engagement and retention rates. This goal can be achieved by making fundamental equity analysis accessible to traders through simple, convenient tools that provide their clients with easy-to-read fundamental analysis, already interpreted into understandable and solid investment recommendations.
Our AI equity research platform could have helped traders reading its reports to beat most major stock indexes by a large margin this year.
For example, electronic components and services provider Avnet, Inc. (AVT), a mid-cap company trading on NASDAQ, has received a Strong Buy score from our AI based on its Q1 2022 report, showing strong balance sheet, stellar cash flow and outstanding earnings momentum versus its peers. The company’s stock has risen over 11% this year, while NASDAQ has tumbled 28%.
Another “Strong Buy” company with outstanding fundamentals - such as very strong earnings growth, among other parameters - is a small-cap groceries supplier Natural Grocers by Vitamin Cottage, Inc. (NGVC), trading on NYSE. The company’s stock surged almost 30% YTD, as opposed to a loss of 24% of the small-cap benchmark Russell 2000.
As these examples show, it’s crucial for investors to have access to up-to-date fundamental data and analysis. In this market, buying into index-following passive investment vehicles hoping for a turnaround, is like trying to catch a falling knife; so quality research is the name of the game.