According To One Metric, This Could Be The Best Time For Stock-Picking In A Decade

This article was originally posted on Forbes.

The last three years have been dismal for fundamental long/short managers, and stock picking at large. However, at Sentieo, our analysis shows that we are currently in the best environment since before the 2008 crash for picking stocks. Now, that isn’t to say that this is the best time to buy stocks, nor is it a prediction of fund performance. But, according to an analysis of one metric, cross-correlation, the current market should provide an unusually ripe environment for stock picking.

First, a bit about what we mean by cross-correlation: The pairwise correlation between two stocks is a value between -1 and 1, that indicates how likely the two securities are to move in the same direction. Over a given time period, two stocks that perform identically will have a value of 1, two stocks have no correlation at all will have a value of 0, and two stocks that are perfectly inversely related will have a value of -1.

We ran the pairwise correlations between every stock in the S&P 500 and every other stock in the index (249,500 computations!) from the 2007-8 financial crisis until now. Averaging all of the correlations provides an indicator of how much stocks move in tandem with each other. If the cross correlation is 1, there would be no opportunities for stock picking since all stocks would move in tandem with each other. The higher the value of the index, the more difficult it is to make money by selecting individual securities at that point in time.

The graph below shows the cross correlation for the entire S&P 500 over the past decade. There are a few important takeaways from this chart. First, it is clear that the cross correlations of the S&P 500 are at decade lows. Second, we see a preponderance of large spikes in the data.

S&P 500 Cross-Asset Correlation
S&P 500 Cross-Correlation

As you can see, the spikes correspond with market shocks, the major macro events of the last decade. The jump in cross correlation following a market shock is to be expected. When this sort of event happens, the entire market tends to turn in one direction as it collectively decides to buy or sell. The most recent inflection point, however, the 2016 election of Donald Trump in the United States, behaves differently.

The 2016 US Presidential election has driven correlations to new lows. Furthermore, correlations in the market actually began dropping prior to the November 8th election day, around the time when then-FBI Director James Comey sent a letter to Congress on October 28th. As opposed to the market shocks where the market all reacts in the same direction, it seems the collective market doesn’t know how to react to Donald Trump with any certainty. In other words, as of today, Donald Trump is an inherently uncertain entity that is creating opportunities for security selection.

Impact on Hedge-Fund Returns
As shown in the chart below, hedge fund monthly returns for long/short equity managers tend to react inversely to cross-correlation, as we would expect. This provides further validation to the idea that cross-correlation is a solid predictor of the overall environment for stock picking.

Monthly Returns of Long/Short Equity Funds
Monthly Returns of Long/Short Equity Funds

We can further apply cross-correlation to show the volatility of selected sub-sectors of the S&P 500. Doing so, we can demonstrate which specific sectors may have benefitted the most from the US election, again, purely from a stock-picking perspective.


The Financial Sector

The financial sector, understandably, showed the largest drop in correlation after the Comey letter. (In the graph below, the letter’s release corresponds directly with the drop preceding the 2016 election). The sector overall, however, remains relatively highly correlated. This is to be expected from a heavily regulated industry, with regulation having a dampening effect on volatility. The five largest stocks in this sector are the following; JPM, WFC, BAC, HSBC and C.

S&P 500 Financial Sector Cross-Asset Correlation
S&P 500 Financial Sector Cross-Correlation

The Technology Sector

Technology looks fairly similar to financials in that we see a precipitous drop following the Comey letter, with a small bounce back in recent months. The group, however, runs at a lower average correlation in general than does the Financial sector. Tech correlations have crept up recently because some investors and brokerage houses have begun voicing concerns about valuations in the past few weeks. The five largest stocks in this sector are; AAPL, GOOGL, GOOG, MSFT and FB.

S&P 500 Technology Sector Cross-Asset Correlation
S&P 500 Technology Sector Cross-Correlation

The Consumer Services Sector

The Consumer Services sector has shown a modest decline in correlation since the election, but with no bounce back in recent months. Furthermore, it has the lowest cross correlation among all the sectors listed, at less than 0.2. The largest five components of this sector are AMZN, WMT, HD, CMCSA and DIS.

S&P 500 Consumer Services Sector Cross-Asset Correlation
S&P 500 Consumer Services Sector Cross-Correlation

The Energy Sector


The Energy sector has not seen the same large drop in correlation resulting from the election. It has shown some mixed results of late, perhaps in part due to the recent selloff in oil prices. The five largest stocks in this sector are; XOM, GE, CVX, TOT and PTR.

S&P 500 Energy Sector Cross-Asset Correlation
S&P 500 Energy Sector Cross-Correlation

The Capital Goods Sector

The Capital Goods sector has dropped to its lowest point in the decade by far; a more drastic reaction than all of the previous sectors discussed. This is perhaps due to the prospect of increased infrastructure spend which has been proposed not only by the White House, but also by members of the Democratic party. The five largest stocks in this sector include; TM, BA, HON, UTX and LMT.

S&P 500 Capital Goods Sector Cross-Asset Correlation
S&P 500 Capital Goods Sector Cross-Correlation

While not making a call on the direction of stock prices, we have found that the current environment is the best for stock picking in a decade, and that this is, in some capacity, due to the uncertainty emanating from the Trump Administration. We have found this effect to be particularly pronounced in the Capital Goods and Consumer Services sectors.

Therefore, active long/short fundamental equity managers should be looking for stock picking and pair-trading opportunities right now.

Introducing the Sentieo Research Management System (“RMS”)

Sentieo-rms-dashb-mac-r2@2x-min
Sentieo is pleased to officially announce the introduction of its cloud-based integrated Research Management System (“RMS). The new RMS provides deep analytics to help investment professionals identify and analyze behavior and processes that drive their performance and decisions. How many times did an analyst increase her price target after reading an earnings transcript she annotated as “positive” and did such changes drive positive or negative performance? Sentieo’s RMS allows users to input different variables used in the decision-making process and to track each update.

With a robust set of collaboration tools, Sentieo’s RMS allows teams to work together in the same set of shared documents by jointly highlighting, commenting, and annotating. Teams can further synch across devices, forward emails, clip articles, and automatically integrate notes from Evernote and OneNote in real-time. Furthermore, the platform allows teams to analyze their entire decision-making process tracking relationships between various actions like increasing a price target after conversations with management.

Sentieo RMS is the first of its kind to be integrated into a robust financial research platform, rather than a point solution. The Sentieo platform includes industry-leading financial document search, a powerful financial data terminal, a data visualization suite for alternative data, and more. The RMS is seamlessly integrated into the product, avoiding the need for an analyst to leave the platform to take notes, share, and collaborate on research.

Optimized for compliance and security, Sentieo’s RMS helps asset managers automate and enforce compliance requirements without putting undue burdens on the analysts’ productivity. Sentieo automatically logs all activities and notes, making compliance a breeze.  All data is encrypted at rest and in transit, and all notes are versioned, easily searchable and available via an API to be stored in any data vault.

Much like their corporate counterparts, consumer-grade apps like Evernote and Microsoft’s OneNote have found their way into the information-intensive investment research process. These applications do provide a basic, albeit limited experience with which to capture, organize, and share information*. On the other hand, legacy RMS vendors provide tools to manage and analyze the research process but their clunky interfaces have missed out on the trend in consumerization of IT. Sentieo RMS combines the best of both worlds: a seamless, easy-to-use, interface with enterprise-grade security and detailed analytics and reporting for compliance.


Sentieo Notebook is an information hub to Enhance Data Organization & Accessibility

Sentieo helps make investment professionals more efficient. The notebook provides a workspace for organizing and searching all research including notes, highlights, charts and more. Easily gather content that matters and keep it all in the cloud mobile accessible for quick reference.

Sync Across Devices
Whether you’re on a desktop or mobile device (iPhone, iPad, Android), you can take notes and access your research regardless of whether you’re at the office or on the road travelling. Our offline sync capabilities even let you take notes without Internet access.  
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Evernote and OneNote Integration
Two-way sync with Evernote and OneNote gives you access to all of your Sentieo Notebook content right inside of your favorite note taking apps. Don’t want to disrupt the way you take notes? Create content in Evernote and OneNote and have it sync back to your Sentieo Notebook.
Forward E-mails
Send important emails and attachments directly to your Sentieo Notebook so that you can keep track of all of your notes in a single place. Keep track of interesting articles on the Internet with our web clipper. Save the contents of any webpage for future access in the Sentieo notebook.
Web Clipper
Keep track of interesting articles on the Internet with our web clipper. Save the contents of any webpage for future access in the Sentieo notebook.

Switching back and forth between content sources – SEC filings, broker research, transcripts, company presentations—is a significant waste of time and effort by an investment team member whose skill set is best used to analyze and interpret information, not manage it. Professionals can access all company source documents, investment theses and notes, and financial highlights from a single screen. Read the latest company documents and research reports while seamlessly adding highlights and annotations. All notes are automatically tagged with the appropriate ticker, allowing instantaneous recall of key highlights relevant to an investment thesis.

Collaborate with your team

In an investment team environment, it’s important to recognize the power of the collective intellectual capability of the team. The market greatly rewards investment teams with a diversity of thought and the courage of their convictions. Ideas, theories, and opinions can flow freely and efficiently across the entire decision-making spectrum, helping uncover ideas while avoiding landmines. Sharing knowledge efficiently both increases the alpha potential and also acts as an intellectual risk management tool.

This is why we have designed-in sharing and teamwork all across the platform. Teams can work together on the same set of shared documents (notes, filings, transcripts, research reports, etc.) and collaborate by jointly highlighting, annotating, and commenting directly on any document. Sentieo is where your investment ideas begin to take shape, allowing team members to seamlessly share and exchange ideas with one another.

RMS: Enhancing your team’s efficiency and decision making

Investment professionals not only need to identify actionable ideas, but they also need to share such ideas with a broader team and convince the broader team of the probability of success. Within the RMS, an investment team (or portfolio manager) can review every document an analyst reviewed and failed to review, every note taken within those documents, every investment thesis written about a company, every meeting attended with that company and all of their peers’ prior comments.

Sentieo helps investment teams stay organized when it comes to their portfolio and ideas on a company:

  • Dashboards: The portfolio and ticker dashboards broadcast all recent activity related to companies in the coverage universe. Stay on top of activities such as recent notes, documents, document highlights, company events, comments, and tasks—all on one screen. It also includes a high-level overview of all notes and documents related to the particular ticker, with an activity feed that shows the work that has gone into this ticker all on one screen.
  • Portfolio Summary Table: The Portfolio Summary table enables an understanding of the current state of ideas and investments in a team’s investment universe.
  • Thesis sheets: Our customizable thesis sheets allow the user to easily summarize the key points of a thesis on a stock so that their team has a collective view on all investment ideas. This is where you house your team’s thesis on the stock. With multiple people on the team all covering different stocks, this becomes the go-to place to understand the thought process behind the investment. All fields on the thesis sheets are customizable and trackable
  • Task Manager: Managing deadlines and remembering items on a to-do list can be difficult. With the new Sentieo Task Manager, a user can add tasks to notes and assign them to themselves or a team member, along with due dates. All tasks are automatically aggregated across notes and made available on the ticker dashboard.

…and more


With an organized way to analyze the research process, portfolio managers, risk managers, and directors can drive transparency across the organization along with oversight into analysts’ recommendations. Management can quickly and easily ‘analyze the analyst,’ validating any investment recommendations being made as well as analyzing each team member’s strength, weaknesses and overall performance in a coherent and logical manner.


Research management that’s compliant

Compliance is at the forefront of every investment professionals thoughts these days. The entire financial ecosystem wants to ensure they are compliant while pursuing their mandates. Sentieo’s RMS helps investment management firms automate and enforce compliance requirements without putting undue burdens on analyst productivity

Our platform has been architected from the ground up to meet an asset manager’s ever increasing security and compliance demands. Sentieo has worked hand in hand with some of the world’s largest hedge funds to deliver fully synced compliance backend systems.

As analysts conduct research in Sentieo’s integrated and secure research environment, Sentieo works behind the scenes to provide data management, electronic recordkeeping, and communication control.

Given the sensitivity of research information, we offer a high-end encryption protocol, along with options for single-tenant and a virtual private cloud offering. These configurable options allow for the security equivalent of an on-premise solution along with the cost and maintenance benefits of a cloud solution.

Last, but not least, management and compliance have access to any and all information across the entire research platform via an administrative login or compliance dashboard. Sentieo automatically logs all activities and notes making compliance a breeze. An organization’s notes, including those synced via our OneNote and Evernote plugins, are versioned, easily searchable and available via an API to be stored in the firm’s data vault.

The overall result is a research workflow that makes teams happier, faster, and more efficient. For more information on our new RMS, e-mail us at hello@sentieo.com or request a free trial.

 


*Note: While we believe consumer-grade note-taking apps are not the ideal research management solution, the Sentieo Notebook can integrate with those apps and support compliance recordkeeping needs for users already using them. Your organization’s notes, including those synced via our OneNote and Evernote plugins, are versioned, easily searchable and available via an API to be stored in your data vault.

The VIX Is Back to Pre-Crisis Lows. Does It Matter?

The CBOE Vix Index is a popular measure of the implied volatility of the S&P 500 index options, calculated and published by the Chicago Board Options Exchange.

The Sky – Is It Falling?

If you watch major business news channels, you may have recently heard that the last time the VIX fell to its current low coincided with the beginning of the Great Financial Crisis of 2007-2008.  It’s a sensational story line.

Shown below is a chart from the Sentieo platform with the S&P 500 Index (^GSPC) in light blue and the VIX Index in black.  The chart shows that the VIX has recently moved down to levels not seen since right before the financial crisis in 2008.  At the same time, the broad stock market appears unconcerned.

It’s a sobering historical comparison and, based on this data point alone, one might think that the S&P 500 Index is on the brink of sailing right back into the Bermuda Triangle of finance.

But does television chatter of a potential stock market selloff – premised solely on exceptionally low volatility – square with reality?

Fortunately, quick use of the Sentieo Plotter function shows that while the VIX and the S&P 500 do trade inversely, low volatility by itself is not at all a good predictor of stock returns.

The following is a regression analysis run using the Plotter function in Sentieo comparing the VIX Index vs. the S&P 500.

The r-squared is 0.67, and the coefficient is a healthy -7.02.  In fact, the VIX Index has a -0.82 correlation with the S&P 500 over this time period (of course, higher volatility is almost always associated with lower stock returns).

S&P 500 and VIX Index Regression analysis in Sentieo Plotter.

But Is Volatility Predictive?

One way to test the significance of volatility on forward returns is to lag one of the data series and re-run the regression with the lagged series.  Fortunately, this is easy to do in Sentieo’s Plotter: We simply lag the S&P 500 returns, as shown, using the “Axis Options” feature.  In this case, we’re lagging by a positive 8 weeks as shown.  Now when we re-run the regression we will see if a change in the VIX Index is associated with an 8-week-later change in stock prices.

Axis Options: add 8 weeks to the S&P 500.

The result?  After comparing the VIX Index with the following 8 weeks’ returns of the S&P 500, the R-squared between the two series actually drops from 0.67 to 0.24!  That is to say, based on this sample, that, while a significant coincident indicator of stock returns, the VIX Index is not a future indicator of returns.

Conclusion:

Tune out the TV chatter.  Try Sentieo and do your own homework.

It’s a great headline, but the analysis here suggests the VIX does not foretell another crisis.

 

Sell In May Has Gone Away?

With the S&P up 7% year to date, is it time to sell in May and go away?

It’s an old Wall Street adage, and the data appear to bear it out.  Since 1950, the S&P has returned 3.4% on average for the year up to April, while returns from June to October have averaged only 0.9% over that time.

However, over the last five years the dynamics of the monthly seasonal trade have not only changed but have become even more pronounced.

Summertime Has Been Producing Good Returns:

Beginning in 2012, January to April returns have averaged 4.9%, similar to the full series from 1950, but June to October returns have also averaged a healthy 3.95%.

Most notably, July has emerged as a very strong month, and June has turned from negative to positive.  Also of note, the seasonal weakness in September has pulled forward into August.

This analysis suggests that August, not May, is the real bogeyman for investors.

Volatility Has Been Spiking In August:

Another way to come to the same conclusion is to look at the average returns of the CBOE VIX index shown below.

The VIX index is a measure of stock market volatility, and rapid changes in market volatility are highly correlated with negative stock returns.  Over the past five years, August has been a very volatile month.  By contrast, July has lower average volatility, much like February, March, and November.

The conclusion – Sell in May has (recently) gone away.

Which then leads us to ask: How to monetize this idea?

Sectors Which Do Well In the Summer:

First, we looked at sectors which have, since 2012, typically done well over the June-July time frame ahead of August’s turmoil.

Energy, Basic Industries, and Transportation have tended to under perform.  Health Care, Utilities and Consumer stocks have tended to do well and that’s where we should look for buys.

Seasonal Buy Rank Table:

Taking this analysis one step further, we can rank stocks which are not up a lot year to date and yet which usually do well in the summer months before August.

Target (TGT) screens well.  Relative to the S&P 500 it is only in the 3rd percentile for year to date returns, yet it is in the 81% percentile for June-July going back to 2012.  It’s also a consumer stock, which is a good summertime sector as we have shown above.

Further proof of the historical returns for June and July for this stock can best be seen by using the Returns menu in Sentieo, shown below.

TGT is a solid green in the month of July going back to 2009.

Where might monthly seasonality come from?

Historically the stock market was much more driven by seasonal cycles in manufacturing and crop harvesting.  In the modern era, it may be the case that investors’ expectations are more and more the source of returns.

Again using the Sentieo platform, we can see internet searches for the word “Earnings” and use that as a proxy for which months we are likely to see the most earnings reports.

As shown below, the big search months appear to be January-February, April, July, and October.  So one theory explaining the shift in the dynamics of monthly seasonality the past five years versus a look back to 1950 might be that modern managements are far more savvy about setting lower expectations earlier in the year (hence weak January results) and are able to “jump over” the low bar later in the year – thereby driving the now-more-positive returns in July and October relative to history.

Conclusion:

Sell in May?  No way!

Summing it all up, before you follow a well-worn adage, take a minute and check against the monthly returns map in the Returns menu on the Sentieo platform.  You may capture returns others don’t.

And don’t forget: this year, it may pay to wait to sell until July!

5 Canadian Companies With Unusually Large Buybacks

In Canada, a substantial issuer bid (SIB) is the formal term for a tender offer to repurchase shares. SIBs can be used to buy back an unusually large amount of shares beyond what’s allowed with a typical NCIB buyback program (Normal Course Issuer Bid). Tender offers may be a sign of improving corporate governance or savvy management taking advantage of their stock’s undervaluation. Or, large buybacks might simply be misleading demonstrations of confidence in a company’s prospects.

We’ve compiled a cheat sheet of Canadian stocks that are in the process of buying back a substantial portion of their float. We looked at the past 3 months of filings to find stocks that are:

  • In the process of a SIB
  • Have completed a SIB and continue to repurchase shares

The market capitalizations of the 5 stocks we’ve found range from C$133M to C$3,186M, so there should be a reasonable amount of liquidity for the largest stocks in this group. Without further ado, here’s our cheat sheet…

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Introducing the Sentieo Trump Tracker: Follow The President’s Impact on Your Investments

trump-tracker-facebook-og-image (2)

Today, we are excited to introduce the Trump Tracker. It’s a bot that constantly scans new public financial documents for mentions of President Trump. These documents include all SEC filings, conference call transcripts, investor presentations, press releases, and more. The bot instantly surfaces new mentions of Trump as soon as they’re published, while intelligent queries automatically sort them into topics like Obamacare, Mexico, and NAFTA.

Anyone interested in following the administration’s impact on public companies can engage with the Trump Tracker by checking the dedicated website, following the @trumptrackerbot Twitter account, or signing up for a daily email alert on the site.

The Trump Administration is Now a Stated Risk Factor for Public Companies

When we last wrote about the Trump administration at the end of January, we noted that the markets paid six times as much attention to the new president’s policies as compared to those of President Obama over a comparable time period. Sixty days after President Trump moved into the White House, we see that trend continuing.

The number of regulatory filings mentioning President Trump sharply increased after Inauguration Day on January 20th. We measure a total of over 1750 filings mentioning President Trump from January 20th through March 22nd, 939 of which are SEC documents.

There is a significant change in the tenor of those mentions as well. We see references to President Trump shifting from high-level comments to more formal statements in the “Risk Factors” disclosure sections of SEC filings. Overall, 60% of references to President Trump within SEC filings are in the “Risk Factors” section. This is a substantial increase from the less than 15% we observed during the presidential campaign. This trend is even more pronounced in the healthcare industry, where we find that 85% of mentions since Inauguration Day were contained in these sections.

This shift is illustrated in the graph below:

Each bubble in the above graph represents an industry, while the size of each bubble corresponds to the number of SEC filings mentioning President Trump in that industry. The higher the bubble, the larger the share of those mentions present within “Risk Factors” sections. The dotted line, meanwhile, represents the average share of Trump mentions within “Risk Factors” sections across the market.

As you can see, both the number of mentions and the share of those mentions contained within “Risk Factors” sections has increased significantly since Inauguration Day.

In the months preceding President Trump’s inauguration, only about 15% of mentions were contained in “Risk Factors.” Over the past two months, that number has increased to 60%.

In total, Trump has already been mentioned in the “Risk Factors” sections of 10% of all 10Ks filed across all industries since January 20th.

Why are Tech and Consumer Discretionary so quiet?

We are surprised to find that only 4% of technology companies’ 10Ks and 10Qs filed since January 20th mention Trump at all. Likewise, in the Consumer Discretionary category, only 4% mention Trump.

These industries are reliant on overseas manufacturing and foreign workers, both of which are threatened by the President’s stated policies. We would have expected therefore to see a larger share of cautionary statements. These results therefore leave us wondering if management teams are rightfully dismissive or if they are hiding their heads in the sand?

Big Topics, Little Attention

Some prominent topics are largely absent from filings despite having been flagged repeatedly by market participants as a high risk. These include:

  • The Wall: We found only one SEC filing referring to Trump’s wall on the Mexican border.
  • Immigration and H-1B Visas: This is a key issue for many tech companies but also several other industries from Agriculture to anything with a high-street. H-1B visas are not mentioned at all, and Immigration in general is mentioned in only three SEC filings since January 20th.
  • NAFTA: Though Trump has threatened to renegotiate NAFTA, which could threaten American agriculture and associated industries, we find only eight mentions of the topic in SEC filings since January 20th.

Below is a summary table with the results for several key recurring themes of President Trump:

Source: Sentieo Document Search

Methodology

The Trump Tracker is built on top of Sentieo’s powerful financial document search and keyword alert engine. The Bot is constantly scanning through over 9 million financial documents that include SEC filings, conference call transcripts, investor presentations and press releases.

To generate the alerts, we built a series of complex queries that search for the word “Trump” in the proximity to other keywords. In most of these queries we also automatically filter out mentions of some of Trump’s businesses so that our alerts are more focused on real mentions of President Trump. However, the Trump’s Businesses filter allows you to see these mentions.

We plan on adding additional themes and would love your feedback. If you have an idea for a new theme, please email us at trumptracker@sentieo.com.

Banner image of Trump (at top) from AP Images. 

Consumer-grade apps don’t work for equity analysts

Our CEO, Alap Shah, wrote a guest article that appeared in HedgeWeek this morning on the topic of consumer-grade note-taking apps, and why they don’t work for equity analysts*.

Investment analysts, by and large, are a pretty smart group. If they can find a better way to do their job, they will. So it’s no surprise that an industry that relies so heavily on information has adopted a number of consumer-grade apps to enhance their workflow. And while better than nothing, this practice can create more problems than it tries to solve.

In the analyst community, note-taking apps such as Evernote and OneNote now often serve as the foundation for the research process, in spite of the fact that neither were designed with analysts in mind. Why are these solutions being adopted? First, they are mostly an improvement over the ubiquitous network and folder structure. Second, they are fairly cheap and easy to use. But perhaps most importantly, they bypass internal IT operations that would otherwise express security concerns with such apps. While these solutions do offer an improvement over a network and folder topography, many times they are more like putting square pegs in to a round hole – they might fit, but you’re going to have to smash them in there pretty hard.

On the surface, consumer note-taking applications appear to be a good fit to manage the enormous amount of information—broker research, news, internal notes, SEC filings, call transcripts, etc.—that forms the basis of the fundamental research process. However, there are a number of instances where these generic apps fall short, and, ultimately, inject more problems into the research process than they solve.

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Auto Insurance Voices Caution As Self-Driving Cars Near

We analyzed over 9 million financial documents, covering more than 10,000 companies across the globe, for mentions of the self-driving car theme. We found that interest in self-driving cars has grown 8.5x in the past two years, but suspect that there is much more interest to come. Predictably, car and technology vendors were earliest in bracing for the technology’s impact, but the insurance industry is now beginning to take the threat seriously.

tesla self driving

Self-driving cars are approaching quickly. Google unveiled its self-driving project just four years ago, while Tesla shipped the first car with its famous auto-pilot feature just one year ago. Though impressive progress has been made, much more is needed before self-driving cars reach scale. In the meantime, there have been setbacks. Last May, the first person was killed in a car operating on auto-pilot, while Uber ended its San Francisco self-driving project after a week amid permit conflicts with the DMV, along with several sightings of its cars running red lights. (The project continues in Arizona.) Despite the inevitable bumps along the way, self-driving cars—also known as “autonomous vehicles”—will almost certainly become a reality within the next two decades, and their impact will be felt massively across the transportation and logistics industries, among others. (more…)

Guest Post: 5 Oil Patch Themes You Should Be Following In 2017

Guest Post courtesy of happy Sentieo client and energy expert Philip Dunham .

2016 was a volatile year for oil and gas. WTI traded to lows in the mid $20s, then rebounded to finish the year around $54. The road to recovery for the energy industry in 2017 can be characterized as cautiously optimistic as WTI prices have stabilized over the past couple of weeks and energy companies have started to slowly hire and ramp activity.

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There were a number of themes that emerged as the year progressed including:

  • Rebounding rig counts and the return of service cost inflation
  • The Dallas Fed and Permian-focused E&Ps expressing concerns over rich Permian Basin acreage valuations
  • Another year of low oil prices and OPEC production cuts
  • The RINsanity of ethanol blending and a possible border adjustment tax
  • Natural gas coming out from the shadow of oil with demand catching up to supply

We will review the themes of 2016 and those themes going forward into 2017. (more…)