Wise Up with Alternative Data
July 18, 2018
Alternative data levels the playing field between investors and corporate insiders.
Venture capitalists leverage alternative data to provide them with crucial information about companies’ performance. Wall Street research analysts can monitor business operations throughout the world without ever stepping foot inside the business.
“Alternative data is information gathered from non-traditional information sources. Analysis of alternative data can provide insights beyond that which an industry’s regular data sources are capable of providing,” writes TechTarget.
Recently, a private equity client asked our team to assist with market mapping and sourcing Direct Primary Care (DPC) clinics. Specifically, the PE group was hoping to broaden the footprint of its existing DPC holdings through additional clinic acquisitions. As part of their selection process, they wanted to go beyond the analysis of balance-sheets. They wanted to study various “alternative data” sources available from the marketplace to discern patient perception and brand sentiment towards certain geographically targeted clinics.
“Alternative data provides the means to go beyond the balance sheet to understand how stable or fragile consumer preferences and loyalties may be.”
The voice-of-the-consumer (VOC) data analysis report we prepared was filled with marketplace consumer insights along with demographic and geographic facts for various clinical practices. Leveraging the report insights, the portfolio managers established a list of clinics to inquire about strategic partnerships and interest in a possible merger or acquisition.
Knowing what to look for and what to listen to is critical in the deployment of alternative data in decision making. However, with today’s abundance of disparate data sources there is a growing epidemic of data-paralysis plaguing decision makers. We regularly find that asset managers prefer to avoid analyzing alternative data – rather than embrace it.
Conducting research with alternative data does not always come easily – but as the abundance of information available grows, so too will its adoption.
Investors want to know if customers will shift when a new super-store opens – or if there are other potential disruptors across the marketplace that could sway attention and perception. Alternative data matters for investors who care about the trends at large.
Investment banks are embracing the relevance of alternative data as well. Goldman Sachs, for example, has begun including the measure of Twitter mentions in stock research reports.
Leaving alternative data out of the decision making equation diminishes the quality of strategic decisions investors and businesses are making. How are you leveraging alternative data to help make better strategic decisions?