Rise of the data-rich investors


If you’re a parent, you have probably read about the importance of a STEM education for the next generation.

That’s STEM as in science, technology, engineering, and math.

In all of those fields, I think that numbers and statistics play a vital role in understanding the subject matter.

 

investing

 

 

Statistical Power

In the case of businesses, I believe that statistical analysis can help executives improve efficiency by using past data to analyze possible future trends.

In my opinion, statistics, and the ability to make sense of numbers, are key to managing emerging fields like cloud computing, artificial intelligence, drones, voice-activated e-commerce and data analytics related to security.

In my view, we’re about ten years into the big data explosion, with many industries already applying these tools.

 

Digital Maps

In the energy sector, for example, integrated oil companies are making digital versions of all of their largest assets to better track maintenance, drilling yields and production levels.

In the healthcare field, wearable devices equipped with sensors are monitoring blood pressure, glucose levels, and heart rates.

In retail, digital technologies are also revolutionizing our understanding of consumer behavior.

 

Big Data

In my opinion, big collectors like Amazon (AMZN), Facebook (FB), Google (GOOGL), Apple (AAPL) and Netflix (NFLX) have built-in advantages.

In my view, the more data a company has, the more powerful the algorithms that can be built.

As time slowly moves on, society integrates technology to become more efficient. In my view, that trend applies to the investment world as well.

Consider the economic outperformance of the United States markets versus the rest of the world.

 

Smart Investing

If you look at the US economy, in my analysis, the data suggests that American companies deserve to sell at a higher multiple than nearly any other country.

Big institutional investors have all kinds of data to analyze which can compare multiples on a global basis.

The same holds true for individual companies in the US versus their peer group in specific regions around the world.

 

Takeaway

In my opinion, this is where algorithmic investing and trading can be a powerful tool, identifying price discrepancies versus what’s historically been the case.

In my view, if you haven’t done so already, it may be time to dust off that old statistics book.

Photo Credit: Christiaan Colen via Flickr Creative Commons

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Yale Bock
Yale Bock
Y H & C Investments is a registered investment adviser based in Nevada. Yale Bock founded the firm after 15 years of experience as an individual investor. Yale also manages the secured lending operations of a family-owned business.