Avoiding The Value Trap Through Qualitative Research

Since the end of the 2008 financial crisis, growth stocks have soared spectacularly and value stocks have remained relatively cheap. Coupled with a steady uptick in interest rates looming on top of an already questionable global economy, value investors are beginning to see new opportunities on the horizon. But how can investors avoid falling into the “value trap?”

Value investors take many quantitative factors into consideration when reviewing a stock for purchase. Factors such as a stocks relative valuation to the market, yields, foreign exchange volatility, and inflation. But, it’s the qualitative research that allows investors to spot the market catalysts and prevent them from falling into the value trap.

AlphaSense allows investors to conduct the qualitative research needed to predict changes that can affect a company’s valuation. AlphaSense platform is intuitive and easy to use so users can immediately:

  • Monitor Competition: Search press releases to:
    • Monitor shifts in market share through potential mergers and acquisitions (M&As) and new product release
    • Identify companies issuing debt to detect early signs of M&As or potential product expansions
    • Find any external forces that can affect pricing power
  • Find Regulations: Search for regulations that could change the company’s cost structure, market size, and positioning
  • Identify Key Points: Access earnings call transcripts and investor relations presentations to easily see management’s history, style, transparency, and consistency. Users can also use these reports to see what the market is saying about the company they’re researching and monitor trends in shareholder activism
  • Compare 10Ks and Qs: Use the industry’s best Blackline Reports. With AlphaSense, users can easily scan quarterly and annual SEC filings and digest detailed, word-level changes so you can process more documents in less time and avoid missing critical information
  • Set Alerts on Saved Searches: Users create watchlists to monitor the companies they follow to easily search across all companies at once and receive automated email alerts with text snippets on saved searches

Any investor can pull financials from various systems with little difficulty. AlphaSense gives investors a competitive edge by allowing them to understand what the market is saying, what management is discussing, and how competitors are positioning themselves.

Advancements in technology have allowed investors to gain information more quickly, however, with that comes a deluge of information and noise to sift through. AlphaSense allows users to intuitively filter out information “noise” that comes from thousands of data points, and view documents based on multi-factor relevance scoring, helping users easily identify relevant information.

While value investing tends to outperform growth investing over the long-term, not seeing a stock in the full context of the market can be the difference between identifying a catalyst vs. falling victim to the value trap. Instead of being caught by surprise by the shifts in a stock’s valuation, predict them.

Jack Kokko
Jack Kokko

Jack Kokko is the CEO and founder of AlphaSense, the search engine for market intelligence. His mission is to leverage AI to help businesses acquire information more efficiently, and make better decisions more quickly and confidently.

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