Computerized Investing > January 20, 2018

New TipRanks Sentiment Tool Lets You Harness Crowd Wisdom

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by Harriet Lefton

TipRanks journalist Harriet Lefton describes the financial advice tracker’s new investor sentiment tool.

TipRanks has recently enlarged its performance tracking service by releasing a new Individual Investor Sentiment tool that allow users to harness the wisdom of the crowd. In an effort to bring transparency and democracy to the capital markets, the site now reveals not only what top financial experts and analysts are recommending but also what other investors are actually buying. This feature is open to free users, with the exception of the top-investor filter, which is only available to premium members.

Based on data from over 200,000 portfolios on the Smart Portfolio platform (named Editor’s Choice in CI’s Best of Web for portfolio tracking), investors can now get real-time answers to questions such as “how do similar investors allocate their portfolios?” and what better-performing investors think about stocks and exchange-traded funds (ETFs). You can see whether other investors are positive or negative on your stock selection, while drawing fresh investing inspiration from the most popular stocks. This is possible because the new feature also enables investors to see which other stocks similar investors are buying.

How to Use the Individual Investor Sentiment Tool

Let’s take a closer look now at how this feature can help you refine your own portfolio:

Step 1: Enter the stock you are interested in into the search bar on the TipRanks home page. Out of the 5,000 stocks covered, we picked one of the most popular tech stocks right now: Microsoft Corp. (MSFT).

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Step 2:
Click the Investor Sentiment button on the Microsoft page sidebar, along the left-hand side of the page.


 

Average Holding Size

Immediately, we can see that investors have an overall positive sentiment toward Microsoft. And if we select the best-performing investors option (a premium feature), the sentiment becomes even more bullish. We can see that on average, based on the 2,380 best-performing portfolios that hold this stock, individual investors choose to allocate almost 4% of their portfolio to Microsoft. This provides users with a valuable insight into the weight other investors attribute to specific portfolio stocks. A higher percentage suggests a greater confidence in the stock in question.

Number of Portfolios

Furthermore, top investors in general have a “very positive” Microsoft sentiment signal, on a spectrum that goes from very negative to negative, neutral, positive and very positive. As the screen shot below shows, the number of top portfolios holding Microsoft over the last week and month increased by 0.4% and 1.1% respectively. For both the average holding size and the number of portfolios holding MSFT, you can see the number of portfolios the data is based on in the small text underneath the percentages.

This data is extracted from the top 20% of all the portfolios managed on the TipRanks’ Smart Portfolio platform. Crucially, in order to ensure these are active portfolios, data is only taken from portfolios that have been modified in the last three months.


 

But we also wanted to extract new insights from this valuable data and show how age and investing interact. An American Funds survey of 1,203 adults showed that only 44% of millennials see themselves as long-term investors and think that market fluctuations are natural. This is compared to 60% of baby boomers who, in contrast to millennials, prefer to stick with their investment strategy rather than flitting from hot stock to hot stock.

If we scroll further down the page, we can discover the investing performance of three different age groups, as well as their investing performance in general (as shown in the screen shot below). We can see that the baby boomer strategy pays off—that is, in this particular case.

Interestingly, the over 55s boast the lowest average beta at 1.10 and the highest average dividend yield of 1.76%. This contrasts with the under 35s who only score an average dividend yield of 1.20%. However, it is Generation X (35–55) who take the prize in terms of average monthly return for their portfolios. Their 2.4% monthly portfolio return easily beats both the 1.5% return of millennials and the 1.9% return of the baby boomers. As above, these figures are calculated based on the average returns of active portfolios managed on the Smart Portfolio platform.


 

The best part is that we can use these insights to generate fresh investing inspiration. The Individual Investor Sentiment feature enables us to also pinpoint other top stocks that are popular with specific investor groups.

For example, based on the fact that the monthly return results are highest for 35–55s, we may choose to drill down further and see which other stocks Microsoft investors between the ages of 35 and 55 are also buying. In the picture below, I filtered the results by Last 30 days Holding Change to reveal which stocks Generation X snapped up in December. The answer: two hot semiconductor stocks, Applied Materials (AMAT) and Micron Technology (MU).



 

Or, if we show the stock selection of only the best-performing investors, we find the surprising revelation that top investors are “very positive” on controversial auto stock Tesla (TSLA) right now. Again, this is on a spectrum that goes from left to right: very negative, negative, neutral, positive, very positive.


 

Indeed, while Tesla may only have a cautious hold consensus rating from TheStreet.com, in the last 30 days, the best-performing investors—that is, the consensus between investors within TipRanks that have consistently outperformed the market—who hold Microsoft in their portfolio have increased their TSLA holdings by 1.2% (you need TipRanks Premium to see this). Perhaps they are making the most of a slight pullback in Tesla shares.

Use Crowd Insights to Maximize Your Returns

Available as part of the TipRanks platform, our Individual Investor Sentiment tool utilizes TipRanks’ data so that investors can analyze multiple portfolio types and gain unique crowd insights. Premium members can also optimize their portfolios by taking inspiration from stocks held by best-performing investors in their sector.

I encourage you to go to the Individual Investor Sentiment feature at TipRanks and see which stocks the top investors on our site are buying now.


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