Sunday, September 24, 2006

How I Make Money With Google

The One-upmanship Factor:
Leveraging Google tools for speculative, short-term, news-event driven investing with Just-in-Time (JIT) company/industry research

The Application:
To be a successful investor, you don’t have to be the fastest on the block, just faster than Johnny to make money in the stock market

You can skip the next background section ("The G2") and dive into the "The Tactics" to get to the meat of the strategy.

The G2:
News Events
News drives a lot of investing, and the quicker you get and react to this news the bigger your potential gain. Company news such as the release of earnings reports, acquisitions, mergers, new contracts, new alliances, new products, new product or analyst reviews, court rulings, up for sale rumors, etc. all can have an impact on that company’s stock short-term price. And news events don’t have to be directly related to companies, industries or commodities to be useful for triggering investing activity. News events such as natural disasters, declarations of war, change in political regimes, flu outbreaks, Fed announcements, etc. all have significant impact on the global investment community. For example, home improvement store stock prices climbed after Katrina. Your ability to detect these news events and react to them as quickly as possible is the key.

The average investor will never be able to compete with automated systems that can “read” news events (see The Resource Pool), determine their investment potential, and automatically make buy or sell decisions within a few seconds. The key is not to try to beat these systems, but instead beat the general public. Your gain can still be significant. Review the following graphic for a better explanation (click to enlarge).

Google Alerts (Beta)
Google now offers a very nice e-mail alerting system that can inform you when specific terms appear in news, on the web, or in groups. The most important delivery option is “as it happens”. This will cause Google to send you the results as close to when the news event has occurred as possible (see the Google Alerts help page for more details on their event determination criteria). The news is delivered in an e-mail where the subject contains your search terms (i.e., “merger”). The body of the e-mail will contain the search results in the familiar Google search page results format. Many times there will be only one result per e-mail. You can get it delivered in HTML or plain text (which is useful for interacting with your own home grown tools – see The Tactics).

JIT Company and Industry Research
Unless you are tracking news for a specific company or industry, you will mostly likely know very little of the company(s) in your news alert. This is why JIT research is so important. You will need to be able to quickly research each company, its competitors, and its industry to make an informed decision on whether to buy this stock (or commodity) or not. Google Finance is a useful starting point for this research, and can followed by Yahoo Finance and others such as Hoovers.

The Tactics:
Google Alerts' Search Terms
Picking your search terms for Google Alerts is one of your most important tasks. Search terms that are too broad will give you too many useless results; to narrow and you miss too many. Use the advanced search options (the same available for regular searching) to refine your search terms. Search terms can be completely independent of specific company names and this can be an advantage over other techniques that just look for specific company or industry news.

Understanding the financial implications of specific news events is very important. Establishing the “cause and effect” is useful in planning your strategy and for picking your Google Alerts’ search terms. You should spend some time to see what happens when specific events occurs, and what industries and company profiles are impacted before you begin buying stock. I recommend setting up several Google Alerts and tracking what happens to the companies and industries that appear in you e-mail alerts.

Lesson: be clever and bold, but do your homework first!

Tracking the Stock for Signs of a Price Decline
Since this strategy is primarily designed for maximized short-term gains, tracking the stock price after you have purchased the stock is very important. You should aggressively track your stock and sell it when the price starts to slide.

Grow Your Own Tools
Google currently allows you to have an unlimited number of alerts (but this is subject to their verification policy). You can route different alerts to different e-mail accounts. Tracking many alerts (based on many different search terms) can be very time consuming. Creating your own software tools can reduce this effort. Since this service is e-mail based, almost any programming language can be used to retrieve, parse and process your Google Alerts. These programs can run in the background on your PC while you work, and could do one or more of the following:

• Filter / categorize your alerts
• Issue a sound or pop-up when certain alerts are received
• Put the alert contents into a database
• Launch “screen scraping” processes to retrieve additional information
• Forward your alerts to other e-mail recipients
• Send your cell phone a text or SMS message

The following is an example of some simple Perl code that can retrieve and print your e-mails (to the console) automatically. This compact code could easily be enhanced to send the e-mail contents to your cell phone and/or put the contents into a SQL database.

# view all outstanding e-mail messages
$Name = 'xxxxxxxx'; # account
$Pass = 'xxxxx'; # password
$Serv = '';
use Mail::POP3Client;
$Client = new Mail::POP3Client($Name, $Pass, $Serv); # new mail object
$TheState = $Client->State;
if($TheState eq 'AUTHORIZATION')
{ die "Bad user name or password.\n" }
elsif($TheState eq 'DEAD')
{ die "Mail server unreachable or unavailable.\n" }
$NumMsg = $Client->Count;
print "Number of outstanding messages = ($NumMsg)\n";
#Loop through the messages (starting at 1)
for($i = 1; $i<=$NumMsg; $i +=1) {
print "--------Heading for msg $i ---------\n";
$Headers = $Client->Head($i);
@HeadList = split(/\n/, $Headers);
foreach $Line (@HeadList) {
print "$Line\n";
}; #
print "--------Body for $i to Follow-------------\n";
$Body = $Client->Body($i);
@BodyList = split(/\n/, $Body);
# print "$Body\n";
foreach $BLine (@BodyList) {
print "$BLine\n";
print "-------End of Body $i -------------------\n";
}; # for i
# Close the connection

There are also inexpensive off-the-shelf software tools (see The Resource pool) that can retrieve, parse and store the contents of any e-mail message.

The Resource Pool:

Google Alerts

Google Finance

Inxight – Automated reading and comprehension software

Cypress Technologies - Message Parse Email Processing software


Anonymous said...

Sounds interesting. Can you give me an example of some search terms to use?

Thx - rick

kimosabe said...

Hi Rick,
Thanks for taking an interest in my post. I've found court rulings to be a good source of prospects. A Google Alert (News) for that would be:
"court's ruling" -Supreme location:usa
The advanced search options narrow down the search to the U.S. and eliminate Supreme Court rulings.
I hope that helped.