We don’t envy the challenges investment management firms face daily. 

Complex regulatory requirements. Data-intensive business models. Competitors introducing disruptive technologies. Legacy system incompatibility and sprawl. It’s enough to cause stressful days and sleepless nights for leaders tasked with driving innovation and solutions around these issues.

Many cloud-based technologies provide frameworks that allow innovation leaders, CIO’s, research directors, and portfolio managers to scale solutions for their business needs more effectively and efficiently than on-premise (“on-prem”) solutions can offer. But even with clear-cut advantages provided by cloud solutions, concerns can arise regarding security, uptime/operational resiliency, and how cloud technologies map to regulatory guidelines.

These tradeoffs need to be evaluated by a firm based on their operating model, with evaluations taking into account both off-the-shelf and bespoke software options (no wonder that the global software consulting has become a $200 billion industry!)¹

Unlocking the Power of Investment Research with Cloud Technology

Investment management companies know that the core driver for their firms’ performance is their investment research: sound research drives new investment ideas. When done well, research can help firms capture that elusive alpha. 

As a result, when narrowing our focus to evaluate most investment managers’ research management processes, the value a cloud-based approach can provide starts to emerge. Leveraging the power of cloud computing as part of a research management system (RMS) can: 

• Drive significant workflow efficiency improvements across research and investment teams
• Create a centralized, standardized platform for collaboration, regardless of team member locations
• Provide real-time visibility into investment theses for key internal stakeholders (eg, portfolio managers)
• Deliver a single, secure source of truth to guard IP and streamline compliance reporting preparation

In the evaluation process, we don’t want to downplay the importance of addressing any concerns that may result from a move to the cloud vs legacy on-prem strategies. When assessing RMS vendors who’ve transitioned to the cloud, due diligence should include understanding a vendor’s:

• Data protection and access controls, both while in transit and at rest
• Standards for high availability, especially for global organizations
• Information security and infrastructure designed around risk management best-practices
• Compliance with global security standards

Takeaways

Your research team likely developed an organic approach to getting their work done; we’ve seen it with many companies. But more often than not, these approaches have either relied on clunky internal systems or are patchworked across multiple, disjointed software programs that provide limited visibility across teams.

Cloud-based RMS technologies have emerged that can help with creating more efficient workflows, improved collaboration, and better visibility of research outputs for organizations. These tools can be an important, high-impact step in an investment manager’s digital transformation journey. Take time to do your due diligence and find your best fit, and you can unlock more of your research team’s valuable insights.

1. https://www.thebusinessresearchcompany.com/report/software-consulting-global-market-report

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With the Q1 2022 reporting season coming to an end, excessively rocky markets, and an aggressive tightening by global central bankers, these are the major themes that stood out to us. Sentieo clients can request our customizable Risk Monitoring dashboard (short video walk-through) for their accounts which covers multiple indicators, from volatility to credit spreads to daily changes in rates to trading volumes to sentiment to cross-correlations between the major equity ETFs. We are also seeing one of our favorite screens from the covid sell-off getting more and more names (conservatively financed revenue growers with attractive FCF yields and high ROIC).

1. We have been in a high volatility regime this year: while the daily spikes in the VIX index dominate the headlines, a smoother moving average shows that we are above the long-term mean (19.6) and median (17.1) for the indicator.

(public chart link)

Looking at a one-year chart of the VIX with a 50-day moving average, we can see that volatility bottomed in Q3 2021, and has been moving upwards steadily.

(public chart link)

2. Even traditional conservatively positioned portfolios are doing poorly as the move in interest rates has impacted fixed income assets across the spectrum (government, corporates and asset-backed). For example, a 50/50 SPY (S&P 500 ETF) and AGG (Barclays US Aggregate Bond Index ETF) is down 11% YTD as of “pixel time”, a highly unusual situation.

(public chart link) 

For positive YTD returns, investors would have had to have substantial commodity exposure: a portfolio with 20% each SPY, AGG, MNA (merger arb ETF), GLD (gold) and USO (oil futures; risks) ekes out a positive 5% YTD return.

(public chart link)

3. Inflation is a major topic on conference calls: we see a large spike in transcripts that mention inflation this year, overlaid with the YoY% change in CPI-U (Sentieo users: FRED Macro data set CPIAUCSL, YoY % Change).

(public chart link)

4. Inflation, especially commodity inflation, is resulting in margin compression across sectors. For example, the average EBIT margin in the S&P 500 Household and Personal Care companies (PG, CL, CHD, CLX, KMB) is at a decade+ low.

(public chart link)

5. The upwards move in rates is affecting rate-sensitive sectors, such as real estate. The standard US 30-year fixed rate mortgage is at a 10+ year high, and homebuilders (using the ITB ETF) and brokerages (ZG RDFN RLGY) have declined.

(public chart link)

6. In terms of sector performance, energy and agriculture/fertilizer stocks have been standouts YTD. Global energy (IXC) is up north of 30%, pipelines (AMLP) up 20%, and global agriculture producers (VEGI), up 10%+. 

(public chart link)

7. Equity sectors that have been hit hard YTD are SaaS names (CLOU) and biotechs (XBI), down about 30% and 35%, respectively.

(public chart link)

8. Digging deeper into the fixed income markets, we see negative returns across the board, regardless of credit or seniority: the broad AGG (mentioned above), 7-10 and 20+ year Treasurys (IEF and TLT), IG and HY corporates (LQD and HYG), senior loans (SRLN), and mortgage REITs (REM). Credit investor clients can request our Credit Portfolio Monitoring Dashboard (video walk-through) or, for idea generation, our Credit Topic Monitoring dashboard (video walk-through).

(public chart link)

9. And there are “hidden” volatility winners: for example, EBIT grows quite a bit with volatility for the sole publicly traded high frequency firm Virtu (VIRT): we can plot YoY% change in EBIT against the VIX.

(public chart link)

To learn more about how we performed our analysis and created the charts in Sentieo, watch our basic and advanced data visualization webinars and read this data visualization guide.

The post Q1 2022 Themes in 11 Charts appeared first on Sentieo.

Download the Trendbook

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So far, we’ve explored how vast information landscapes have led to information overload and how AI is helping cut through the noise.

Today, we’re going to take a look at how a centralized research approach can help firms leverage technology to improve their workflows and transparency.

Power Up Research Workflows to Stay Ahead of the Pack

Today’s markets move on news at lighting speeds, so the ability to discover, digest, develop and deliver research insights can be the difference between generating alpha and dealing with performance lags.

The graphic below highlights some of the ways AI and other technologies are impacting and improving the research process.

Making the Case by Making a Plan

While AI tools may seem like the perfect solution to the information overload suffered by many analysts, poor implementation can add to the burden. As with any digital transformation project, firms must fully understand what problems they’re addressing and the capabilities of their people.

Additionally, having a sound change management strategy in place is important so analysts know why and how you’re introducing a new solution. A well-thought-out approach should also consider how to ease any analyst concerns about technology eventually replacing them.

If you’d like to learn more, we dive deeper about putting AI and technology to work in your research process in our blog post here or download the full briefing paper here.

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This time around, we’re exploring how technology is helping to manage this problem it helped create. 

AI, machine learning, and natural language processing have led to the development of tools analysts can use to overcome research process efficiency challenges and supercharge the hunt for alpha. While none of these tools replace humans, they augment the decision-making process and ultimately help to build more robust investment cases. 

Download full graphic.

Emotions like overconfidence or fear can lead to significant inefficiencies that provide a valuable alpha source. Sentiment analysis tracks what executives are saying about a company, which can be compared to competitor statements or other analysts’ commentary. 

Sentieo partnered with the Harvard Business Review (HBR) to publish a briefing paper highlighting how inefficient research processes can hinder a firm’s pursuit of alpha. It also explores the idea that while technology is part of the cause, intensifying the flow of information, it can also play a role in the solution.

If you liked what we covered today, feel free to check out the blog post with further insights on this topic or download the full briefing paper here.

The post Overcoming Information Overload: 5 Ways AI is Helping appeared first on Sentieo.

Sentieo partnered with the Harvard Business Review (HBR) to publish a briefing paper that highlights how inefficient research processes can hinder a firm’s pursuit of alpha and while technology is part of the cause, intensifying the flow of information, it can also play a role in the solution. 

One of the key foundational themes of the paper: the challenges that analysts face when researching investment opportunities. For emerging funds, these challenges are often heightened due to their impacts on smaller research teams.

Download the full infographic.

But a good investment team knows that information inefficiencies present opportunities for alpha. As a result, if you can create a more efficient method for your analysts to move through the process from idea generation to investment recommendation, your firm can establish a competitive advantage.

Today, the evolving landscape of AI, machine learning and natural language processing technologies opens new paths for emerging investment funds to level the playing field with larger competitors. We’ll explore this in our next insight piece.

In the meantime, feel free to check out the blog post on this research or download the full briefing paper here.

The post Information Overload appeared first on Sentieo.

Sentieo’s powerful and flexible Dashboards have grown dramatically in both client adoption and functionality since we introduced them two and a half years ago. Showcasing the depth of the research platform, the Dashboards bring together documents, document search, research management/research monitoring, financial and alternative data, data visualizations, Tableaus, iFrames, and much more, through over 50 different widget types. 

Sentieo clients can build their own Dashboards, and have access to pre-built general as well as industry- and function-specific Dashboards. Over time, we have rolled out specialized Dashboards such as Credit Position Monitoring (video walk-through), Special Situations (video walk-through), ESG Topic Monitoring (video walk-through), and our Sustainalytics integration (video walk-through and joint webinar). 

Following the high client demand for our recent Risk Monitoring Dashboard (blog post with video-walk through), today we are introducing two additional dashboards: US Macro and Credit Themes. Below you will find brief descriptions, screenshots, and video walkthroughs of both. 

US Macroeconomic Dashboard 

This Dashboard uses mostly our FRED Macro integration to bring in 21 data visualizations of various macroeconomic data sets, from GDP growth, to inflation, changes in the money supply, housing starts, and credit spreads.

If you’d like a more detailed walkthrough of the dashboard, please watch the video below.

Credit Topics Dashboard 

The Credit Topics Dashboard is useful for idea generation and general conditions monitoring. We see incoming mentions of terms like covenant breach and bridge loans, along with upcoming maturities, new issuances of both debt and equity, as well as data visualizations of the overall credit market conditions. 

If you’d like a more detailed walkthrough of the dashboard, please watch the video below.

To learn more about Sentieo, please visit our Resources page for guides and recorded webinars, or request a demo. 

The post Macroeconomic and Credit Topics Dashboards in Sentieo appeared first on Sentieo.

Creating compelling visualizations is now a must for a wide range of knowledge professionals, from investment analysts to portfolio managers to consultants and executives.

Data visualizations help create stories across investor presentations and letters, internal benchmarking reports, public presentations, and more. Sentieo’s data visualization tool Plotter combines financial, valuation, macro, alternative and internal data sets, and overlays an intuitive calculations layer on top, enabling accelerated analysis.

In Sentieo’s new multimedia guide, we go over several different use cases that demonstrate the power of the Sentieo platform. The full guide, with short in-pdf videos is available for download here.

Below we are sharing one of the use cases where we analyze revenue share and profit pool share in the US home improvement retail industry. 

Revenue Share and Profit Pool Analysis 

Analyzing sector dynamics is another foundational analytic activity that can be done quickly in Sentieo’s Plotter. Here we look at the dynamics of the U.S. home improvement retail market, and more specifically at Home Depot and Lowe’s, though the same approach can be used for more fragmented sectors. First, we aggregate the revenues for the two dominant players and calculate the revenue share. Then we do the same with EBIT as a proxy for the industry profit pool and calculate the respective shares as well. 

In these two visualizations, we can observe the following:

• Revenue share split has been fairly steady over the last 10 years, at 60/40
• However, the EBIT share split has been at 70/30
• This shows that there is room for further analysis regarding the advantage that HD has: economies of scale, customer mix (pro vs. DIY), private label penetration, and similar factors 

Revenue Share Analysis (interactive chart viewer)

Profit Pool Share Analysis (interactive chart viewer)

Watch this short video walkthrough of our revenue share and profit pool analysis:

Download the full guide.

For more extensive demos of the data visualization module in the Sentieo platform, please watch our recent Basic and Advanced Plotter webinars.  Or contact us to set up a demo or get a free trial account.

The post Introducing Sentieo’s New Interactive Guide to Financial Data Visualization and Analysis appeared first on Sentieo.

The recent spike in energy prices across Europe and Asia has been well documented in the press: however, it has been in the making for years. In this blog post, we will share some data on capex trends in the industry. We do anticipate that hydrocarbon energy prices will stay “higher for longer”. For a great in-depth look at capital cycles, we recommend the book “Capital Returns: Investing Through the Capital Cycle”. 

Starting with some of the larger names in the S&P 500 Energy Sector ETF (NYSE:XLE), we can see that capex currently is at around 2004-2005 levels of $8-$10 bn per quarter in aggregate, quite far from the peak of $25 bn+ per quarter in the 2014-2015 period. For this chart, we took the 20-year capex history for Exxon, Chevron, EOG, Pioneer, ConocoPhillips, and Williams. 

(interactive chart viewer)

The picture is very similar with the European supermajors, BP plc and TotalEnergies: their capex also peaked in the 2014-2015 period at over $15 bn per quarter and is now at around $5 bn per quarter (chart is shown in USD).

(interactive chart viewer)

The data looks very similar for the Canadian producers like Suncor and Canadian Natural Resources, as well as for large emerging markets-based players like Petrobras and Sasol. The most dramatic decline in capex that we spotted was that of shale pioneer Chesapeake Energy: at one time the second largest natural gas producer, the company went through a Chapter 11 reorganization. The company now spends about $100-$200 million per quarter versus $3-$4 billion per quarter in the early 2010s.

Interestingly, despite the strength of oil prices (WTI displayed, left axis), the total returns for the XLE Energy Sector ETF are flat on a two-year basis, perhaps indicating a long-term opportunity.

(interactive chart viewer) 

If you are interested in seeing how quickly we built the aggregate capex level chart in Sentieo’s data visualization engine Plotter, please watch the video below.

Find out more about Sentieo’s data visualization capabilities in our recent Basic and Advanced webinars focused on our data visualization engine Plotter. Or contact us for a demo or free trial account.

The post Oil and Gas: “Higher for Longer” after Years of Underinvestment appeared first on Sentieo.

Following record revenues in 2020, global demand for our AI-driven financial research platform continues to grow. To support that momentum, today we’ve announced an expanded presence in the European market.  With more than 50 active customers in the region, including Schroders, Kames, S.W. Mitchell, Cape Capital, Amiral Gestion and Ownership Capita, we’ve doubled our team in the UK and have plans to double the sales team again in the next 12 months.

Our objective is to help customers digitize the financial research workflow and transform their investment research process into a competitive advantage. Featuring a cloud-based solution that incorporates innovative AI search and sentiment analysis, market and alternative data, modeling and analytics – all supported by an integrated research management system – we are empowering customers around the world to modernize their research workflows and drive analyst collaboration for more powerful investment analysis.

This commitment to technology innovation has also garnered two industry awards in the European market. In March, Sentieo was named Best AI Technology Provider in the 2021 Hedgeweek European Awards and in July we were recognized by HFM European Technology Awards as the Best Research Management Solution.

Sentieo is actively hiring across all departments and geographies. To view the available openings, visit sentieo.com/why-sentieo/careers/.

For more details on our EMEA expansion, check out our press release. To learn more about the Sentieo platform, visit https://sentieo.com/product/.

The post Sentieo Expands Across EMEA; Doubles Staff in London to Support Growth appeared first on Sentieo.

Sentieo’s powerful and flexible Dashboards have grown dramatically in both client adoption and functionality since we introduced them two and a half years ago. Showcasing the depth of the research platform, the Dashboards bring together documents, document search results, research management/research monitoring, financial and alternative data, data visualizations, Tableaus, iFrames, and much more, through over 50 different widget types. 

Sentieo clients can build their own Dashboards, and have access to pre-built general as well as industry- and function-specific Dashboards. Over time, we have rolled out specialized Dashboards such as the:

• 39-widget “Fundamentals X-Ray” (video walk-through)
• Special Situations (video walk-through)
• Credit (video walk-through)
• ESG Topic Monitoring (video walk-through)
• Sustainalytics integration (video walk-through and joint webinar)

The new Risk Monitoring Dashboard (available to clients upon request) provides a comprehensive look at financial markets conditions across a variety of metrics, from macro, to credit, to equities, as well as aggregate NLP sentiment from transcripts, document trends, news, technical analysis, and more.

In the partial screenshot below, we display six out of the eighteen different widgets. Clients can add and delete widgets to customize further as well as share the dashboard internally with their team.   

For a detailed video walkthrough of every indicator included, please watch this video: Video: Sentieo Risk Monitoring Dashboard

If you are interested in building your own data visualization Dashboard in Sentieo, this is the “how to” video (including Sentieo’s data visualization engine Plotter, Tableaus, and iFrames): Video: Adding Data Visualization Widets in Sentieo Dashboards

Learn more about Sentieo’s data visualization capabilities in our Basic and Advanced Data Visualization webinars, or contact us to schedule a demo.

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Global supply chains are under significant pressure from COVID and other disruptions. In this blog, we look at inventory levels across leading US retailers, shipping company dynamics, as well as transcript color from recent conference calls.

TIP: If you plan on doing holiday shopping this year, do it now. 

We have been monitoring inventory levels across retail for over a year now. Last September, we collaborated with the Financial Times on looking at the aggregate inventory levels for over 30 retailers after the initial COVID disruptions. 

In one of our favorite data visualizations, we add up the quarter-ending inventory levels at eight leading US retailers: Walmart (also parent of Sam’s Club), Target, Home Depot, Lowe’s, TJX (parent of TJ Maxx, HomeGoods, and others), Best Buy, Dollar General, and The Gap Inc. (parent of Gap, Banana Republic, Old Navy, Athleta). 

In addition, we added the quarterly revenues for these eight leading retailers. Then we simply divided the inventory by the revenues for the most recent quarter. 

We can see that industry inventory levels, in relation to the industry revenues, are extremely low. The usual seasonality (inventory peaking at the end of Q3, and dropping at the end of Q4) has been severely disrupted since COVID.

(interactive chart viewer)

We are seeing the problems in conference calls as well. For example, transcripts that mention container/containers have skyrocketed in recent months. 

(interactive chart link) 

The picture is similar for related terms, such as “freight” and “bottlenecks.”

(interactive chart viewer) 

(interactive chart viewer) 

To be sure, there have been beneficiaries such as shipping giant Maersk. We have seen strong and persistent revisions upwards of the 2021-2022 revenue estimates, along with a strong share price performance. 2023 revenue estimates have also been moving upwards but in a less dramatic fashion. 

(interactive chart viewer) 

The freight complexities are not limited just to trans-ocean shipping. Companies such as Fedex and UPS, are seeing increased costs for both labor and fuel, and have seen a contraction in their valuation multiples recently (using rolling NTM P/E for this example). Both multiples are now below their respective 5-year means.

(interactive chart viewer) 

We also looked for color from recent company transcripts, all from the month of September. 

Nike (footwear and apparel): container shipping times are double the normal

Keep in mind that there are global complexities and differences in transit times and sourcing mix across our geographies, so I’m going to use North America as an example to just go a little deeper on what I’m talking about. Prior to the pandemic, it would have taken approximately 40 days to move product from Asia to North America. Transit times have been increasing due to container shortages, port congestion, rail congestion and labor shortages, impacting the entire industry. And during Q1, these lead times worsened further to now sit at 80 days, roughly 2x normal.

Costco (retail): container and shipping costs are up six times 

Some inflationary soundbites, if you will. Price increases on items shipped across the oceans, some suppliers or us paying to 6x for containers and shipping. Price increases of pulp and paper goods, some items up 4% to 8%. Again, we’re trying to mitigate those where we can, and we think we’ve done a decent job of mitigating some of it.

General Mills (packaged foods): logistics labor and global container shortages will persist 

I guess we foresee labor challenges persisting for quite a while, I mean, especially if you look at logistics. So there’s a shortage of truck drivers here in the U.S., and that’s not going to abate for a while. There is a shortage in shipping containers as we look at global transportation. You can see them on pictures in the L.A. port. So that’s not going to be — go away for a while. And while we have seen a little bit of loosening in the labor markets once the government spending has kind of decreased, that’s not going to solve the whole — that’s not going to help solve the whole dilemma. So I would suggest that the challenges we have with labor and labor inflation are going to persist for quite some time. We have not really seen them abate significantly at this point.

Terex (industrial): the shortages are “irrespective of cost”

The ability to have available containers and ships to get the machines to the European market is definitely an issue irrespective of cost.

Cracker Barrel (restaurant and retail): 200-300% increases in container costs

On the retail side, we have similar pressures there. Those are more in terms of some of the shipping costs and container costs. As many of you’ve probably seen in a lot of articles, you see ocean freight containers are up at times from 200% to 300% over kind of contracted rates.

ConAgra (packaged food): supply-demand disbalance ongoing since COVID

The first piece is supply-demand bottlenecks, everybody knows that since the start of COVID, the level of demand for food companies’ products has been elevated. It has remained elevated. And with Delta variant and other labor issues, that has strained the supply chain of many companies in the space. I tip my hat not only to our folks, but other companies for working this very effectively to the best of their abilities. And it’s a day-by-day challenge, but I’m proud of the work our team is doing to keep servicing our customers and getting products to our consumers on the shelves.

Eaton (industrial): bottlenecks are “materially worse” in Q3 2020

I mean, clearly, the big challenge for us is really supply chain availability. Again, it’s been well-documented, the issues around semiconductors, resins, various types of metals that we source. And so coming into Q3, we really expected that we’d start to see some improvement in some of the supply chain bottlenecks. And much to our surprise and to the surprise, really, I think, of everybody in the industry, we’ve seen that things actually got materially worse in Q3.

Hasbro (toys and games): doubled the number of ports used to address the delays

We’ve added domestic ports in the United States. In fact, we’ve almost doubled the number of ports here in the U.S, we’ve added a number of ports that we are now using in Asia and in China.

Freshpet (pet food): equipment delays even for local food manufacturers

But we’re supposed to be starting up our second line in our Kitchens South, and we have 2 pieces of equipment that are coming from, 1 from Japan and 1 from Europe that are stuck at a port. And getting through the ports is a problem. So we have about a 2-week delay in starting up that line because we can’t get stuff moved through the port. Those kinds of supply chain issues are things you never worried about in the past, and now you worry about them.

To learn how Sentieo can take your research to the next level, request a demo.

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