USING INVESTORS’ RESOURCES TO EXPAND
ENVIRONMENTAL SCANNING METHODOLOGIES
by
Joan Foltz
While the stock market is not always included in the arenas where foresight is commonly used, investors’ informational resources can function as scanning mechanisms with multifaceted benefits. These informational tools can: 1) minimize environmental scanning efforts within a centralized economic information source, 2) improve the quality, depth, and expansion of the macro-environment, and 3) formulate rates, events, and other markers when developing timelines, s-curves, and technology trajectories with quantifiable data. This is not an explanation of how to identify companies for investing purposes; rather, it describes an approach for scanning financial news and economic indicators that can help outline technological evolutions and emerging trends. Since news regarding an array of issues can trigger immediate reactions on the stock market, and new transparency regulations promote instantaneous dissemination to virtually anyone, the banner financial resources targeting investors now provide stellar real-time and comprehensive coverage available to the public.
The motivation of institutions, venture capitalists, and analysts to find the next emerging trend, product, or technology thus reduces the lag time between innovation and analysis of its potential. Compounded with the advancement of automated trading computers reacting to every piece of economic news and knowledge management systems linking individual stocks, financial systems have evolved into singular advanced knowledge-compiling systems scanning the macro-environment. Internet technology now enables individuals to ascertain the benefits from these systems that previously were available only to professionals.
SCANNING FINANCIAL MEDIA
Financial research extends across all STEEP categories (social technology, economic, environmental, and political) in the macro-environment. Investors demand information beyond the immediate environment, expanding the periphery into the global environment. Scanners get the benefit not only of consolidated headlines from news sources, but also from brokers’ research teams and analysts, whose perspectives and speculation can even forecast potential events and emerging issues.
The array of information available in one location expedites both scanning and monitoring efforts. Monitoring activities focus on a particular issue, while scanning takes a broad reading to tag signals and formulate emerging trends by using intuition and pattern recognition.1 A comprehensive investors’ portal will support both techniques, plus automatically link potentially relevant information, which elevates the knowledge of the domain and the scope of the scanning strategy.
Various commentaries found on these sites also expand conditioned viewing that typically concentrates on selected areas and removes any biases or tendencies toward preconceived perceptions or expectations the scanner may have.2 Analysts’ evaluations and technologists’ quantitative analyses contribute to the confirmation of new trends and reduce the vulnerability with predictions. Financial news of earnings and market share reports provide substantiated research and measurement that contribute to building trajectories and systems structures.
Government regulations and public demand for more transparency have also expanded the frameworks of these resources. Coupled with the availability and accessibility information technology provides, the optimum investment resources surface as environmental scanning systems that meet objectives defined by Coates: 1) all STEEP categories are considered, 2) research uncovers potential threats and opportunities, 3) analysts promote future orientation, and 4) economic indicators confirm/establish rate and direction of trends.3
ASSESSING ECONOMIC DATA
Many theorists consider economics the principal driver of progress and development. According to Molitor, the dominant factor of eras on the horizon (Leisure Era, Life Sciences Era, Megamaterials Era, New Atomic Age, and the New Space Age) is the economically healthiest sector—the sector that creates employment and increases GDP. He goes as far as attributing the sector’s dominance as the prevailing influencer on shaping the human condition.4
The economic impact on decision making and shifts in the global order has not only characterized the current era, but may also be a driver for expanding a capitalist world-system as defined by Immanuel Wallerstein. As more nations open to capitalism, fortifying an economically integrated world-system with the command to influence decision making at all levels, emerging opportunities will attract global capital. Hence, it makes sense to follow the financial markets and interests.5
The rate and amount of capital investment strengthens efforts to accelerate regional development or technological innovation and can cultivate a leader, stimulate new trends, and change consumer choices. Google is an example of equity markets boosting a company’s ability not only to infiltrate a market, but to provide the capacity to quickly accumulate other assets to create a powerhouse that disrupted domains beyond the Internet sector. Without the infusion of capital powered by intense media coverage, Google’s penetration rate may not have enabled them to become the dominant factor of the Internet.
Since funding through stock markets, private equity, and IPOs can jumpstart a product’s commercialization and acceptance, economics should be considered not only in regional development and emerging trends, but also in technology forecasting methods.
QUANTIFYING S-CURVES AND TRAJECTORIES
Scanning the myriad of available information sources can be time con-suming, particularly when attempting to determine which products or technologies are contributing to a technology’s evolution. Effect-ively monitoring emerging innovations, companies, or regulations that are not directly related to the core technology can require technical skills beyond those of the scanner or a system’s modeler.
Financial news highlights potential threats by competitors, new entrants, and disruptive technologies. The information, when gathered as a continuous practice, manifests cycles, emerging patterns and discontinuities, which are necessary to plot a trajectory or pace the rate of change of a conventional S-curve, with not only technological evolution mapped, but also the corresponding timeline and rate of adoption.
Companies typically become listed on a stock exchange when they emerge with a commercial introduction. The rate of diffusion can be determined by tracking the rate of capital investment, and evaluating regulations, standards, acquisitions, competitor analysis, and market penetration. Wall Street’s valuation of this potential is usually reflected in the stock’s performance. Since investors are always searching for the next great growth opportunity, emerging technologies and companies with future potential attract their interest. Resources that scan and assess the available information for investors offer searching capabilities useful for other scanning purposes as well.
Changes in university policies encouraging corroboration with commercial research firms to share in patents and commercialization also have motivated innovation to move from the introduction stage immediately into general diffusion. Economic investments augment the potential and accelerate the rate of public acceptance through instigating news coverage, which plays a significant role in framing the sector and firm as investors look for confirmation of relatively new enterprises.6 Google catapulting to the forefront of the Internet sector, real estate bolstering the US economy, and China dominating the global commodities markets are all examples of momentum, fueled by intense media coverage that propagated shifts in sectors and regions.
UTILIZING FINANCIAL INFORMATION
The compilation of economic information provides validation and assists in monitoring the pulse of the economy. Tracking the shifting dominant positions, whether a company, sector, or region, is the underpinning of forecasting economic eras, which are marked by the sector’s absorption of employment.7
Economic Indicators
Economic indicator reports are posted on calendars featured on investor Web sites, which eliminate the need to access numerous government agency sites. Using the data to estimate the strength of the US consumer, shifts in growth economies, and sector dominance enhances the quantitative measures used to project cycles. Statistics reported on a regular basis as key economic indicators include:
· Housing market—sales, starts, permits, construction expenditures.
· Employment—initial unemployment claims, employment situation, employment cost.
· Consumer spending—auto sales, wholesale retail sales, consumer price index, personal income, outlays, and saving, retail sales.
· US Gross Domestic Product—GDP, producer price index, manufacturing surveys, inventories, orders, industrial production and capacity utilization, business inventories and sales, durable goods, US international trade in goods and services.
Company News
Financial Web sites usually cover any news releases that could have a potential impact on a firm, including both issues specific to the company and general uncertainty. Updates on government regulations, competitor patent approvals, licensing agreements, and consumer behavior highlighted in a company’s news headlines can signal emerging changes for an industry.
The following is an example of a snapshot of developments in the fuel cell industry from headlines for the company FuelCell Energy obtained from one broker’s Web site during October 2006. Tracking the company’s contracts contributes to determining the band of acceptance of alternative fuels and the rate of adoption.
October 25, 2006 headlines
9:14 a.m.—“FuelCell Energy to Install Ultra-Clean Power Plant Running on Milk-Processing Waste to Power California Wastewater Treatment Facility”
BusinessWire
October 13, 2006 headlines
8:48 a.m.—“FuelCell Energy and US Department of Energy Finalize Award to Develop Clean Coal-Fueled Multi-Megawatt Solid Oxide Fuel Cell System”
BusinessWire
9:02 a.m.—“FuelCell Energy Named One of Connecticut’s Fastest Growing Technology Companies in Deloitte's Technology Fast 50 Program”
BusinessWire
October 10, 2006 headlines
8:30 a.m.—“FuelCell Energy Helps Sierra Nevada Harness ‘Beer Power’ to Reduce its Energy Costs by 25% - 40%”
BusinessWire
October 7, 2006 headlines
7:59 p.m.—“FuelCell: Pacific Gas to Fund $1.9M for Fuel Cell Installation”
Dow Jones
7:54 p.m.—“FuelCell Energy Expands California Market with Sale of Ultra-Clean Power Plant to Resort”
Dow Jones
8:30 a.m.—“FuelCell Energy Expands California Market with Sale of Ultra-Clean Power Plant to Resort”
BusinessWire
Leading Sectors
Monitoring sectors renders confirmation of forecasted cycles and identification of turning points in trajectories. Tracking sector dominance by using lists of the “leading sectors” provided by financial Web sites highlights the shifts in sectors. The strength of the associated sectors indicates the power of a shift to another era.7
A significant change in the home construction index in 2005 signaled a decline in the housing market before it actually peaked in 2006. Spikes that occurred, such as the one in the housing market, could be a correction or an aberration in a long-term trend where construction remains a dominant factor in defining the current US economic cycle. Tracking this index can signal changes other sectors and economic indicators, such as raw materials, employment, and consumer spending.
New Highs
Stocks that consistently appear on “New High” lists often indicate a company is leading or emerging, with a potential for future growth from an increase in market share or new product introductions.
“New Highs” can be found in publications, such as Investor’s Business Daily, screening features in stock trading platforms, or financial news Internet sites. A list that sorts the companies by industry sector minimizes the data collection effort by focusing only on the particular sectors of interest.
Private Equity/IPOs
Initial public offerings (IPOs) and other private equity investments attract funding for emerging technologies, products and services that are gaining awareness and moving toward commercialization. The advancement of product or service adoption becomes more evident as investors increase participation with expectations of increasing chances of future profitability.
Lists of companies about to enter the public market are available as early as the time of registration of an IPO, which can be found on MSNMoney. Not all registrations culminate in an actual IPO. Performance can be tracked individually once it hits the market to determine the strength of its emergence. Investor’s Business Daily has two features that track IPO performance: “IPOs Soon to Be Priced” and “Prices of Recent IPOs.”
MSNMoney’s comprehensive IPO Center covers all registrations that have not yet traded, IPO performance in three categories, and stats on recent IPOs. Schedules of IPO listings do not substantiate any trend. However, they are still significant for early detection.
Technology Tracking
Publications on both the Internet and print offer regular columns that focus on specific technology sectors, such as Internet, storage, etc. Editorials and reviews of emerging technologies and new trends are evaluated, mostly for potential profitability and mass adoption, which supports positioning the technology along the trajectory path. Walt Mossberg’s column, “Personal Technology,” featured in the Wall Street Journal, reviews products before they reach the market. Mossberg focuses on functionality and performance to evaluate the potential for mass adoption.
Investor’s Business Daily reports an array of information in its “Internet and Technology” section. Data and surveys substantiate trend assumptions, such as the article on e-health systems. The section’s heading always displays market research data points pertinent to technologically-related industries, adding depth and breadth to a sector’s analysis.
Resources
The following sources were chosen for their comprehensive coverage of multiple news sources, which maximizes the utility of the scanning effort. Because of the cumbrous amount of financial information available that includes sponsored sites and analysts’ predilections, only the resources considered primary, unbiased sources by the investment community and do not require professional affiliation are reviewed.
Publications
The most current news is now distributed via the Internet, which offers search conveniences. However, the following publications are also available in print.
Investor’s Business Daily (IBD), www.investors.com. IBD, considered the most comprehensive news source covering the stock market, offers an extensive array of tools, charts and analysis for individual companies and industry sectors. IBD provides insightful speculation in its columns “Trends and Innovations,” “Internet and Technology,” and the “New America” page that features “under-the-radar” profiles of innovative companies. Lists of stocks reaching new highs, IPO listings, and “Leading New Issues” discern forward- trending companies. Leading economic indicators are announced in a daily calendar of activities.
IBD offers a variety of products―a daily paper, an on-line edition with advanced scanning tools, and a weekend edition that summarizes the week’s activities for a subscription fee.
Many financial papers, including the Wall Street Journal (www.wsj.com) highlight technology and emerging companies in articles and in the “Technology Journal” section. Its high-profile articles draw the attention of money managers. However, the economic indicators needed to support forecasts with quantitative numbers are more accessible through free Internet sites.
Other leading financial publications that provide insight to emerging trends and companies are Forbes, Barron’s, and Financial News.
Financial Web Sites
The highly competitive Internet environment has yielded portals with expansive research inclusive of real-time stock quotes, daily charts and historical data with advanced search capabilities, analysis and industry comparisons. Numerous sites require a subscription fee. However, the following free Web sites feature all the economic indicators discussed above, and post associated news from the leading news providers as it is released.
Yahoo.com, http://finance.yahoo.com. The Yahoo finance portal provides some of the most global and comprehensive views of the daily market update. The “Market Stats” feature quickly appends key global indices and their components, including the companies that make up the index. The global financial news headlines under the indices formulate a quick global panorama with daily updated synopsis of the major companies of the world. Commodities futures (e.g., oil and gold) are included in “Market Stats.”
Yahoo’s economic calendar thoroughly covers all leading indicators and relative economic meetings, (e.g., FOMC meeting, crude inventories, retail sales, business inventories, Fed’s beige book, initial claims, trade balance, treasury budget), with links to the originating source and explanations of what the indicator can imply.
Potential trends and unforeseen disruptions can be uncovered in the financial blogs, industry reports on related trends, and expanded news coverage that considers companies indirectly related to the sector. Other features include industry market summaries with sector breakouts, a mergers calendar with news links, and an IPO events calendar that includes post-IPO performance that can be sorted by company and industry.
MSN.Money, http://moneycentral.msn.com. MSN CNBC is a free comprehensive site of business news, highlighting key developments, scanning tools, IPO announcements, earnings calendar, charting and new highs lists. Features enable screening for stocks using technical analysis indicators of your choice. For those wanting automatic updates, a personalized watch list can act as an automatic scanning tool for trending purposes. Their IPO center enables thorough, convenient tracking of the performance of all IPO filings since June 1996, with the recent best/worst returns, and biggest first days listed by industry. However, MSN concentrates on the US market with scant global news coverage. Additionally, the foreign indices are updated, but do not link to the affiliated companies.
Big Charts, www.bigcharts.com. A service of Market Watch, Big Charts offers interactive charts tracking up to five years of historical stock performance and news headlines, which also can be searched by specific dates. All industries listed in the Dow Jones US Sectors are detailed, with individual companies listed according to industry index component.
The Deal, www.thedeal.com. For a fee, The Deal offers the most comprehensive site for scanning the latest news on “deals”—IPOs, mergers and acquisitions, venture capital, and private equity. The “Deal Stats” also provides post-merger and-acquisition metrics and venture capital metrics, which can be used as a source for measuring the strength of emerging technologies and shifts in industry directions.
The site’s global coverage includes funding statistics by industry or region and pertinent legal and regulatory decisions.
Brokerage Sites
Many brokerage firms offer a variety of free analysis tools for account holders and software for on-line trading, which can be used for real-time scanning to retrieve the most recent releases from the major news agencies, plus analysts’ statements. Besides in-depth company news, a key advantage of the trading packages is the automatic alert feature.
In addition to the trading software, the large brokers have Internet research sites for their account holders that analyze emerging companies, new highs, IPO issues, and other economic events calendars. Even those that have their own in-house research analysts also contract with independent research companies, such as briefings.com or Argus Research, that provide further insight.
The services, features and terms are specific to each broker. Some fees for accessing or utilizing the advanced screening tools, research and software may be required, or the broker may have different fee structures or waive fees depending on type of account. Independent software screeners are also available for a fee without requiring an established account at a brokerage firm.
Commercial Trading Software
Powerful commercial stock scanning software requiring subscriber fees are available to anyone, whether or not you are making a trade. The scanning features, geared for the immediacy of short-term traders, are typical of those available by the brokerage services listed above. The advantage of these types of software packages is the alert capability that constantly monitors and scans in real-time. Alerts can also be found on free Internet sites or publications requiring a smaller fee than the commercial software packages.
eSignal, www.esignal.com. The company offers a powerful trading software platform with features found in other professional trading packages, excellent charting capabilities, searching options and streaming news. The service does not require a brokerage account, but does require a monthly subscription fee.
RealTick, www.realtick.com. RealTick’s trading platform has unlimited customizable search features geared for active and professional traders with real-time news, 52-week highs, historical data, and other fundamental market data. Services require a monthly fee.
Telechart, www.worden.com. Telechart offers user-friendly charting capabilities, customizable watch lists, and alert systems. This company was an early entrant to stock charting on-line.
Scanning New Highs looks for signals, which requires further qualitative analysis of the news, events, and information possibly influencing stock performance. Considerations include market behavior and traders’ activity, which may not be an indication of the company’s valuation.
SUMMARY
This article provides an overview of the economic information available on leading financial news Web sites and stock trading platforms, and the benefits a scanner would derive from utilizing these sites. They are rapidly evolving into centralized clearinghouses of current and accurate economic news to meet the demands for instantaneous and in-depth reporting and analysis. Using these mechanisms can reduce scanning efforts, expand the scope beyond the immediate environment, substantiate projections with quantitative data, and uncover potential uncertainties unfamiliar to the scanner. The specific resources reviewed in this article were selected based on their comprehensive, unbiased news coverage and for their special features, such as an IPO center, global coverage, economic indicators, and analysis of emerging technology.
Weighing economic news in the current global environment has become an integral and essential part of any forecasting or systems modeling. As a dominant factor in globalization, the implications of expanding capitalism are attributes of Wallerstein’s world-system, which describes capital movement. This is evidenced by the multitude of global investors fiercely hunting for the next opportunity in emerging trends, regions, and innovations. The focused effort, bolstered with media coverage and an influx of capital, engenders momentum that can create a discontinuity and accelerate shifts in the industry. The emerging dominant industry that impacts GDP and employment marks the beginning of a new era, according to Molitor (2001).
With this intense activity occurring in the financial arena, the amount of time before a new technology reaches market and its rate of adoption can be accelerated with the infusion of capital and media attention. Speculation can forecast a trajectory or mark a timeline based on stock performance responding to or anticipating news. Economic data points can quantify forecasts, reducing the vulnerability to skepticism.
If trying to define an era, one needs to monitor shifts in regions and industries. The essential key economic indicators that substantiate trends are the housing market, employment, consumer spending and gross domestic product, which are summarized under economic calendars on the financial Web sites. A comprehensive site will also consolidate news releases from a variety of reporting services that cover not only the news related to a specific company, but also any regulations or agreements within the industry that may affect the company in the future. Industry sectors are charted and sorted by leaders, just as stock performance is tracked. “New Highs” lists accrued over time can reveal emerging companies and sectors, where monitoring IPO activities can signal new technology introductions that could possibly lead to disruptions. Since investors are looking for growth opportunities from the early development stages, the amount of attention focused on an IPO can determine a new technology’s rate of diffusion.
Competition amongst financial services and media firms to serve a large investor market is creating advanced, real-time scanning tools available through the Internet. A financial site that can be utilized as a scanning mechanism will have, as a minimum, the features described in this article. Understanding economics and using these free resources should be an integral part of any scan strategy that will yield many benefits.
NOTES
1. Ferguson, Sherry D. “Strategic Planning for Issues Management: The Communicator as Environmental Analyst,” Canadian Journal of Communication, Vol. 18, No. 1, (1993).
2. Choo, Chun W. “Environmental Scanning as Information Seeking and Organizational Learning,” Information Research, Vol. 7, No. 1, (2001).
3. Morrison, James. L. “Environmental Scanning,” in M.A. Whitely, J.D. Porter, and R.H. Fenske (Eds.), A Primer for New Institutional Researchers (Tallahassee, Florida: The Association for Institutional Research, 1992), pp. 86-99.
4. Molitor, Graham T.T., “Business Eras Will Dominate the New Millennium.” USA Today (Magazine), November 1, 2001.
5. Wallerstein, I. World Systems Analysis: An Introduction (London: Duke University Press, 2004), pp. 25-27.
6. Pollock, Timothy G. and Violina P. Rindova, “Media Legitimation Effects in the Market for Initial Public Offerings.” Academy of Management Journal, Vol. 46, No. 5, (2003), pp. 631–642.
7. Molitor, Graham T.T. “Beyond the Fourth Wave.” In Association Management (December 1999). www.asaecenter.org.
|