Pssst…want a hot stock tip? Perhaps you might want to check out Hakia-search powered SENSENews, while you still can. The new service aggregates information from news and social media and filters it so as to produce a score to characterize the performance of a company. Individual subscriptions to the semantic-enabled service will be available for a limited time, as the main targets for SENSENews are outfits such as trading houses and hedge funds.
As Dr. Riza C. Berkan, Hakia’s founder, CEO, inventor and chief scientist describes it, the service works on a simple principle: “If there is good news accumulated and the stock price has not yet responded to it, that means the stock is undervalued, because it will respond eventually. Or the other way around,” he says. Its stock indicator service will determine on any given day whether a stock is undervalued or overvalued – which could translate to a buy or sell proposition.
Berkan is careful to explain that there’s more than sentiment analytics at work here. “People have a tendency to say this is another sentiment analysis [product],” he says. “We aggregate facts, fundamental data, reported events, interpretations, speculations, external factors and sentiment. Sentiment is a part of it but only a small part of it, because the performance of a company cannot be characterized only by sentiment.” Sentiment is good for reputation, yes, “but when it comes to the value of a stock of a company, it’s only a small instrument.”
Returns To Love
The trading algorithm behind SENSENews, he says, has proven itself in testing by scoring 14 times higher than the return on the S&P 100 stocks, and two times higher than the Dow Jones Industrial Average. “The next step in the search business is search engines running behind products that don’t have a search box and search button,” he says, and once you see that such search engines are producing indicators that beat stock sets and indexes, “there’s no more question of how do you evaluate the search engine anymore.”
Outperforming indices is a function of trading algorithms looking beyond a single curve, the price curve, as they traditionally do, to also include the news curve. SENSENews discovered what Berkan says is an “incredible” agreement with the news curve and the price curve of stocks when it was pursuing an initial idea to create news indices around the economy, political stability, and so on.
“It was a surprise to us this would work this well,” he says, and that surprising discovery is as applicable to bonds and commodities (like oil) as it is to stocks. “That’s really significant in terms of how assets can be evaluated,” Berkan says.
The service pulls in feeds from about 30,000 news sources using Moreover’s news aggregator, as well as taps into about a million blogs and Twitter. “We take as many sources as we can, and analyze everything out there to properly measure the spread of news [which plays into its credibility] and score the information,” he says. Sixteen criteria, from financial information to sales to management problems to success stories and lawsuits, make up the template criteria for automating determinations of company performance.
Make no mistake – getting to this point wasn’t a quick night’s work. There’s some 12 years and $25 million worth of work behind the core Hakia technology. “We know the value of the technology we have,” says Berkan. “But if you put that next to Google where people are typing in names and entering one single keyword, it doesn’t really doesn’t show the difference as much as we want it to show. So in 2009 we decided we should go after more complicated problems to monetize the semantic technology better.” One of them is enterprise search (look for the launch of Aerohakia for the aerospace industry this quarter), and the other is fast-moving content like news and social media.
Moving in this direction has its benefits, personally and professionally. For one thing, Berkan was getting tired of telling people what semantic technology was and dealing with the debates around the best measurements of search engine performance. “With a financial product we measure with dollars – it makes,” he says. “So there’s no debate.”
As for those dollars, the real monetization capacity is in relationships with trading houses. Hence SENSENews’ plans to stop individual subscription efforts at a certain point. ”We don’t want to lose the edge by spreading this too wide,” Berkan says.