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How Equity Analysts Use Sentiment For Earnings Research

Jan Svenda

It's more important than every to stay ahead of market-moving trends. Sentiment is one indicator of how management teams are communicating the business impact of major events. By analyzing tonality in millions of earnings call and event transcripts for the past 10+ years, we've developed a sentiment scoring model. Try Sentiment within AlphaSense or test sentiment with our Corporate Sentiment Tracker.

How AlphaSense Sentiment Works

Sentiment analysis is a type of AI that helps identify, quantify, and analyze levels of emotion within a portion of text. When AlphaSense Sentiment is activated, phrases within Earnings transcript documents are highlighted in green (positive) or red (negative), to indicate statements as either positive or negative.

spotify

Above: Spotify Q1 2020 Earnings Call layered with AlphaSense Sentiment Analysis.

Sentence-level sentiment analysis 

AlphaSense Sentiment is also capable of selecting which portions of text are more positive or negative than others, allowing you to quickly get to the core of the statement. 

Below, you can also see how Sentiment understands when management is talking about a negative trend in expenses, and can measure the varying degree of negativity within the document. This means you can quickly scan the document and focus on highlighted areas that may be of greater importance to you as an investor or analyst. This can save you valuable time that would be otherwise spent on going through the whole transcript and searching for the same areas.

ford

Above: Ford Q1 2020 Earnings Call layered with AlphaSense Sentiment Analysis.

Understanding Sentiment scores and trends

Sentiment can also act as a check of your previous work. Say you have already gone through the transcript. With Sentiment, you can easily double check whether you’ve missed any important statements that could impact your investment thesis.

AlphaSense’s “Sentiment Trend” charts allow you to tap into previous data points and track how management language develops over time. 

ford senntiment

Each document has an overall “Score,” indicating how “positive” or “negative” a transcript is, and how it compares to the Sentiment score in the previous quarter. 

One of the biggest advantages of AlphaSense Sentiment is the ability to rank transcripts by the biggest shift in Sentiment from the previous quarter. This allows you to hone in on the transcripts that you should pay most attention to. Clicking the delta (Δ) in a list of transcripts sorts the transcripts by the biggest change since the previous quarter. 

2020

Comparing scores can be used to gather quick insights about an industry or overall macroeconomic picture.

Sentiment analysis for sell-side research

Sentiment is just one piece of the advanced, AI-powered investment research tool set that the AlphaSense platform provides.When coupled with advanced Synonym recognition, real-time email and push alerts, table exports, Blackline, and a host of collaboration tools, you are again closer to reducing your reliance on previously time-consuming tasks and focusing on the work that really matters. 

Jan Svenda is an independent equity analyst focused on the U.S. Small / Micro-cap space where he searches for long ideas trading around Net Current Assets Value (NCAV) and for short ideas which showcase a significant potential for aggressive or manipulative accounting.

Want to see how Sentiment can work for you? If you’re an AlphaSense client, log in now to get started with Sentiment, or Request a Demo.

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