Following the Followers on StockTwits

_{Sign up to receive Surface Area or follow me on Linkedin or Twitter. Book a meeting here to talk about ghostwriting from my agency, Principals Media}.

Peter Lynch, the legendary Fidelity Investments fund manager, suggested finding stock market winners by looking for companies not covered by Wall Street analysts. As they are discovered, he said, shares would take off.

“Find a company that no analyst has ever visited, or that no analyst would admit to knowing about, and you’ve got a double winner,” Lynch wrote in One Up on Wall Street.

Howard Lindzon is trying something similar using signals from social media.

Lindzon is the founder of Stocktwits, a social media platform used by traders and investors. StockTwits was launched in 2008 as a version of Twitter for people passionate about markets. The platform has 4 million users, with 500,000 active every day.

What Lindzon realized is that the volume of comments and number of traders who follow a stock is a proxy for interest. Companies with low levels of “watchers” are comparable to those with scant analyst coverage.

To test that theory, Lindzon has started publishing a daily newsletter edited by Riley Rosebee called Trends With No Friends. They screen for companies showing relative strength and then low watcher counts on StockTwits.

I worked on a similar project at Bloomberg. That function screened for companies showing large increases in the volume of tweets with little price moves. The idea was that investor interest wasn’t yet reflected in the market.

Lindzon is also embarking on a general overhaul of the platform since returning as CEO. (Full disclosure: I am advising StockTwits on the project.)

Another feature the StockTwits team has rolled out is price prediction surveys. One from last week asked users to predict the Reddit IPO price. More than 240 people weighed in.

Lindzon said Reddit’s IPO has made him more bullish that tapping into StockTwit’s vibrant community of traders and investors can provide insights that can be turned into content.

Reddit’s offering also highlights the opportunity to use niche content to train language models. (Google paid Reddit $60 million for model training.)

Reddit COO Jennifer Wong told Bloomberg that 19 years of data compiled and vetted by human moderators, organized by topic and tagged for relevance will be valuable for building AI applications.

Riley, the newsletter editor, said many of the companies with big gains and small followings are manufacturing or service companies, not the well-known tech firms that have dominated media coverage in the past decade.

But not all are all small. CoStar Group, a $40 billion company that sells commercial real estate data and just hit an all-time high, has only 1,000 StockTwits followers.

Here are some of the other companies StockTwits has flagged recent that have big share gains and small follower counts.

$MMYT +50% YTD
$APPF +42% YTD
$SUZ +12% YTD
$BCC +16% YTD
$PLMR +51% YTD
$PHIN +26% YTD

It’s a reminder that in the age of AI there are many reservoirs of data that investors can tap for insight.

BRIEF OBSERVATIONS

REDDIT: I love this artifact from Reddit.

SHELLING OUT: You have been warned.

FENTANYL: Good perspective from Ian Bremmer on the fentanyl crisis.

THINGS HAVE CHANGED: Census data showing most affluent areas in 1949.

ALWAYS BE LEARNING: Nice observation from Mario about Bill Gates.