Alternative data is rapidly changing the investing landscape. As a data extraction expert with over 10 years of experience in web scraping and procurement, I‘ve seen firsthand how alternative data gives investors an "information advantage."
In this comprehensive guide, I‘ll provide an in-depth look at the top five alternative data sources that investors should tap into for alpha in 2024, along with concrete examples and advice for putting these insights into action.
A Quick Primer: What is Alternative Data?
Before diving in, let‘s briefly define what we mean by "alternative data."
Alternative data refers to information culled from non-standard, unconventional data sources outside of typical financial statements and disclosures. This includes data scraped from the internet, satellite imagery, geolocation data, sensors, social media, and more.
The alternative data market has exploded in recent years. One estimate put the global market size at $10.6 billion in 2024, growing to $19.4 billion by 2028. Top asset managers are rushing to leverage these new data sources to spot trends, gain investment insights, and generate alpha.
Now, let‘s explore the top 5 alternative data sources that investors should tap into this year.
1. Financial Transactions
Analyzing raw financial transactions from credit cards, Point of Sale (POS) systems, and other sources offers a goldmine of alternative data.
By looking at real-time spending patterns across millions of anonymized transactions, investors can gain a pulse on consumer demand and spot trends before earnings reports come out. Some ways to leverage this:
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Monitor sales at public companies: Analyze credit/debit transaction volumes to estimate revenue in real-time. This helped hedge funds [predict retailers‘ earnings results](https://www.institutionalinvestor.com/article/b1c33fqdnhf9s7/How-Second Measure-Parlayed-Alternative-Data-into-a-Unicorn-Valuation) before public reports.
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Track consumer spending trends: Identify rising or falling demand for products/services across sectors, geographic areas, or demographic segments.
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Analyze market share: Measure competitors‘ transaction volumes to determine shifts in market share. This can signal which players are gaining or losing ground.
The transaction data market is booming, projected to reach $12 billion by 2027.
Specialized firms like Second Measure and Thasos Group offer aggregated insights based on anonymized credit/debit card transactions data. As an investor, look to leverage these vendors or partner with a web scraping firm to unlock transaction data.
2. Internet Trends
The Internet offers endless public data to those who know where to look. Scraping trends in online job postings, search volumes, product reviews, website traffic, and other digital breadcrumbs can yield valuable signals.
For example, hedge funds use web scraped data on:
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Job postings: Analyze hiring demand for key roles to predict company expansions.
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Reviews: Monitor product/service reviews to track customer sentiment shifts.
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Search volumes: Identify rising queries to detect trends in consumer interest.
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Website traffic: Estimate revenue from web traffic and conversion rates.
Thinknum provides website traffic data to assess eCommerce activity.
As an investor, you can tap into data providers like Thinknum and Quiver Quantitative to leverage these web data signals. For more niche data, partnering with an experienced web scraping firm is key.
3. Geolocation Data
Geographic and locational data sourced from mobile devices, WiFi networks, and other sources provides valuable visibility into real-world human activity.
Analyzing foot traffic and spatial patterns allows investors to gauge:
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Store performance: Measure store visits to estimate sales and monitor promotions.
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Supply chain activity: Track shipments/logistics to assess supplier issues.
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Event-driven demand: Identify spikes in activity around conferences, shows, or protests.
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Energy consumption: Detect activity levels to model oil/gas demand.
For example, Thasos Group analyzes anonymized mobile app data to provide daily store traffic insights:
Thasos converts location pings into foot traffic analytics.
Location data provides invaluable boots-on-the-ground insights. Companies like Placer.ai and Near are experts in this field.
4. Satellite Imagery
Satellite imagery allows investors to perform visual audits of activity at remote mines, factories, farms, and more.
By analyzing high-resolution aerial imagery, investors can track:
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Supply capacity: Count cars at lots or vessels at ports to estimate inventory.
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Facility activity: Monitor utilization at factories, mines, or rigs to predict output.
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Agricultural yields: Estimate crop health and harvests.
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Environmental impact: Assess damage from storms, floods, fires, or spills.
Take this case study from Orbital Insight, which provided imagery-based assessments of activity at Saudi Aramco facilities:
Orbital Insight converts imagery into data-driven activity metrics.
Firms like Orbital Insight and SpaceKnow are bringing satellite data to the finance world. This space data can provide unparalleled visibility.
5. Social Media Sentiment
Public social data reveals trends in consumer perceptions and interests. Monitoring brand sentiment, keywords, and events on networks like Twitter and Reddit can provide valuable signals.
Ways investors use social data:
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Brand monitoring: Track consumer perception and react to PR crises.
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Product/campaign feedback: Gauge reaction to product launches or ad campaigns.
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Earnings anticipation: Analyze chatter to predict earnings surprises.
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Trend discovery: Identify rising topics and interest areas.
For example, this analysis from ESG data provider Tensio shows spikes in EV-related tweets:
Monitoring Twitter chatter provides an early signal around rising EV demand.
Specialized social analytics tools like Sprout Social and Talkwalker provide easy access to social data. For more custom insights, partnering with a social media data scraper is key.
Turn Alternative Data into Alpha in 2024
These five sources – financial transactions, internet trends, location data, satellite imagery, and social media – are just the tip of the iceberg when it comes to alternative data. New sources and techniques are emerging every day.
The data is out there. To gain an edge in 2024, investors need expertise in accessing, processing, and analyzing alternative data. My team of web scraping and data experts can help.
Ready to tap into these alternative data sources? Click here to schedule a free strategy session.