7A – Testing the Hypothesis, Part 1

7A – Testing the Hypothesis, Part 1

1.

Retail investors have a difficult time researching companies to invest in due to the overwhelming amount of data spread across different websites.  

2.        

The who: Retail investors all across the globe

The what: Investors cannot easily find information about companies/sectors/markets they are researching and investing in.  

The why: New information is constantly being added to the internet and there hasn’t been a company able to filter all the data into one site.

3. Testing the who:

Retail investors are not the only one who has the problem, financial firms who can’t afford Bloomberg Terminal and even the ones can generally one have one or two terminals. If more than one person is trying to research a company, then they are out of luck.

Testing the what:

There is a significant amount of boundaries with this opportunity. The market share is very limited. Only stock trades, stock investors and analysts have this problem. Also there are already enough respectable solutions to the problem that investors who dislike learning new platforms will continue using their service and not switch over.

Testing the why:

 Investors will say the root of the problem is there are too many variables and figures. Websites want to stay simple and not be cluttered with thousands of random facts making it difficult to navigate their website.   

4.

Interview #1: I met with portfolio manager of The Pacific Group of Oppenheimer. He did not experience the same problem as I did. He said he uses Morningstar, Yahoo Finance, Bloomberg Terminal, and MarketQue, and they work just fine for him. Also he said most of his money is managed money and does not do a terrible amount of analysis work.

Interview #2: I met with a financial advisor at a large financial firm. He said his biggest problem with researching is that there is too much information. There are too many ratios to look at. When judging a company, he only likes a dozen or so indicators and doesn’t need to know the others.

Interview #3: I interviewed a financial analyst and he runs into the problem of having to many tabs open and loses track on where he last was. He generally has fifteen to twenty tabs open and spends a great of deal of time trying to find his article he was just reading. He doesn’t feel like he has a lack of knowledge when researching companies, more like a lack of organization.

Interview #4: I interviewed a college student who is passionate about trading. He feels at a disadvantage when researching companies, he said when he wants to calculate WACC it takes him ten to fifteen minutes. But at a large firm they can go to Bloomberg Terminal and look up the WACC. He wishes he had the technology institutional investors have.

Interview #5: The last person I interviewed was another financial advisor. He is a big options trader. He loves doing research and feels Morningstar does a good enough job in showing the numbers that he doesn’t feel the need to switch platforms. However, if there was a website that did a good job at showing information at a macro level, then he would use it. Meaning if it showed there GDP, main import/exports, unemployment, etc.… Then he would definitely add it to his favorites bar.

5.

Going in I thought my problem was much larger than it actually is. It appears that the reason websites like to stay simple is because people prefer simplicity. They don’t want to know every ratio out there. As long as the websites tells them the dozen or so that they want, then it is good enough for them. The people who do heavy research already have their favorite sites and don’t feel the need to switch. If this product would come to existence, it would have limited market share.