New Software Product Measures Investor Sentiment Towards Individual Stocks

Saw this cool new software product covered by TechCrunch over the weekend that scours the web to gauge media sentiment on a given stock.

Very neat idea – as contrarians we’re always trying to be long when pessimism is high, and short when optimism is peaking.  The Stock Sonar looks very intriguing as a potential empirical measure of this information.

TechCrunch writes:

We all have had the feeling that somehow stock prices are related to good and bad press. A story goes out in BusinessWeek (or TechCrunch!) and a few days later the stock goes up or down. But until now it was only a gut feeling, something you wouldn’t want to bank your nest egg on. Digital Trowel’s TheStockSonar.com is a tool that essentially brings some statistical analysis to bear on that problem and the results are – if not mesmerizing – quite interesting.

The site is basically a stock look-up system. You type in a stock, say APPL, and you get a graph of good and bad sentiment as well as the stock price. The sentiment analysis is all automatic and is based on reports from major news organizations. If the sentiment is good (“We believe this stock is going up”), the green line goes up. If the sentiment is bad (“BP kills baby seals”), the red line goes up. However, TheStockSonar has special semantic technology that can recognize false positives (“BP is great at killing baby seals”). In one demo they showed how the software found real negative sentiment in a paragraph that would normally be seen as positive by a machine (“The shares fell 13%, despite a record quarter sales growth and better-than-expected earnings.”).

Here’s a short interview and demo with Founder Ronen Feldman:

And they have a free trial available on their site.  Would love to get your thoughts if you have a chance to play around with this – and I’ll see if we can do a review of the app at some point as well.