Written by: Amanda Duckworth, Brunswick, San Francisco Jason Golz, Brunswick, San Francisco Graeme Trayner, Brunswick Research, London
In June 2009 a United States-based equity analyst decided to explore a new channel for his research. Unconvinced by Starbucks’ continuing denial that competition from McDonald’s expanded McCafe rollout was a threat to its business, he wrote to Jim Romanesko, a well-known journalism scholar and editor of the independent blog starbucksgossip.com.
The sell-side analyst asked Romanesko to post a question for readers, typically Starbucks employees and customers, saying, “I’d love to get everyone’s take on whether the McCafe launch has hurt or helped recent business trends at Starbucks.” His inquiry drew more than 50 comments, a relatively high number on this site and enough to serve as an informal online opinion poll.
Blogs already influence consumers and are enormously powerful in political circles, while across major markets we have seen the way in which new media informs the opinions of financial comment writers. What we wanted to do was track more clearly new media’s effect on investor sentiment and opinion. Certainly, the hype surrounding blogs, message boards and social networking services (Facebook, LinkedIn, Twitter, among others) would lead many to believe that it is influential. Yet evidence of new media’s value to analysts and investors has been anecdotal at best.
We therefore decided it was time to capture data on the topic and set out to identify which information sources, including new media, were having the greatest impact on investment recommendations and decisions. Our survey of sell-side analysts and buy-side institutional investors across the US and Europe included 448 participants widely distributed across geography, industry sector and age group.
The old way remains the trusted way
Perhaps paradoxically, given our interest in uncovering the influence of new media, we found the old way remains the trusted way for the investment community. Information directly from companies (i.e. conversations with management, regulatory filings, company announcements, corporate websites, etc.) was by far the most important source of data influencing an investment decision or recommendation. Notwithstanding the current mood of corporate mistrust, the survey affirmed the significant value of direct communications with companies and their management teams. In total, 55 per cent of the analysts and investors indicated this was their most influential source. It also demonstrated that other information mainstays remain important, with primary research and real-time subscription information services (Bloomberg, Reuters, among others) ranking high with investors and analysts.
The investment community nevertheless has shifted to online sources of trusted, established media for timely access to news and away from a reliance on traditional print versions of business publications, according to the survey. Consistent with reports of declining subscriptions to print media, online versions of traditional media are considered by 38 per cent of respondents to be in the top three information sources, versus 27 per cent for print. The online versions of these publications became increasingly important over the last year.
European analysts and investors are more likely than their US counterparts to read news in print, and less likely to use new media.