Industrials Equity Analysts: Too much data, too little analysis.

Wall Street Industrials analysts typically follow a few key macro indicators around the world to track their companies (e.g., Industrial Production, Producer Price Index, and business surveys like ISM & IFO). For the most part they rely on company commentary and guidance to project company revenues. Going through the 145 US Industrials companies for which AKAnomics currently estimates revenues through Nowcasting, we find that these key indexes being followed by Wall Street have low information content, and in our assessment contribute towards less than 10% of the mosaic of information that AKAnomics uses (100+ unique data sources, 6000+ variables). As such Wall Street Industrials analysts’ revenue estimates hug guidance closely, and have little ability to differentiate between companies that are likely to either outperform or underperform consensus revenues.

Why do Wall Street analysts struggle with using the global macro data? The macro data comes from many different countries/sources, at different frequencies, and without a common nomenclature, which requires sophisticated approaches to make sense of the world. AKAnomics solves these issues through its mixed-frequency Nowcasting approach using a common framework to tie all the data together, and further connecting this data to each company’s business. And in return, AKAnomics has shown high hit rates for revenue estimates, as well as good forward returns.