Introducing Sentieo’s New Document Search User Interface

Sentieo users are now able to try the beta release of our brand new Document Search user interface (UI). While it may seem familiar, the UI has been rebuilt using modern tech such as React. This new build enables significantly less memory consumption and greater responsiveness across the board. Plus, we’ve extended Sentieo’s sentiment and natural language processing capabilities to include a host of new AI-powered features detailed here.

AI-Powered Features

 

Smart Summary

With Sentieo’s new, ML-driven transcript Smart Summary, we enable analysts to pick up the important information across multiple classifications, such as guidance and KPIs.

To trigger Smart Summary, users can simply click the “brain” icon on any transcript. To learn more about Smart Summary, read this post.

 

 

Query Autocomplete

Our data science team has built an algorithm to identify key terms and topics for all companies within our database. Similar to a Google search, when a user starts typing inside of the query box, Sentieo will automatically populate suggested terms for you based on actual terms used by the company. This makes it much easier to find exactly the keywords you are looking for. Autocomplete intelligently populates based on which tickers and watchlists you have selected in the ticker box.

 

Suggested Synonyms

We are very excited to announce a giant leap forward for our Synonyms system. We have been using an NLP + machine learning-based algorithm for the last couple years to help us internally define and expand our deep synonym library. We are now very excited to open up that system to Sentieo users with our new Suggested Synonyms feature.

Using Suggested Synonyms, Sentieo is able to parse your query and automatically suggest possible synonyms to expand your search. While all of these synonyms may not be pertinent to your search, the function lets you quickly decide which you would like to add to your search. Just click the suggested synonym and it will automatically be added to your search query:

General Document Search Improvements

The Sources Selector

When we looked at usage analytics, we realized that the Document Type filter was the most used filter by a large margin. To make this filter more accessible and easier to use, we’ve made it a part of the main search interface. Additionally, we have renamed the filter to “Sources” to more accurately represent the functionality.

We have also added a quick “only” selector to the right of each source that lets users quickly focus on a single source. 

Additionally, click the > icon at the far right to load up the more granular filters:

All additional filtering is now available with the Filter Button:

 

Configure and Control Your Results Pane

We’ve added the ability for users to easily resize the results panel. Simply drag the divider or use the maximize/minimize button. As you expand, the application will automatically switch to a table view when enough space is present. 

While in the table view, you can also control what columns are visible. Currently, the list of options is limited but the Sentieo team will be adding to this over the coming months. 

For smaller screens, we’ve also added the option to toggle between split pane and results-only views.

 

Company Summary

If you run a search with a ticker but without a query, the Sentieo initial results page shows you all company documents, as well as a company summary and share price performance. We have taken some key metrics and links out of our EDT Summary and provided them within Document Search. Additionally, users can see a historical stock price graph in the company summary.

 

Improved Document Viewer

We’ve made serious upgrades to our Document Viewer as well. You will notice faster load times for documents across the board. Additionally, we have relocated the highlights and the index panel to the right of the document.

We have also relocated the Redlining function to the top right of the document viewer.

 

To try the new Document Search interface for yourself, please log in, or get in touch!

 

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Disrupting Transcripts: Applying Sentieo’s Smart Summary During Earnings Season

After last week’s release of Sentieo’s machine learning-based Smart Summary for transcriptsthis week we will be highlighting exactly how to use this powerful new feature to ensure that you don’t miss important information this earnings season, and that you also save time.  

The Smart Summary tool classifies a document’s language based on several categories such as Guidance, KPIs, and company-specific key terms (like product names) into a convenient, time-saving format. Further, it applies an NLP sentiment filter to highlight positive and negative language. 

Smart Summary is the latest machine learning and natural language processing-based tool released by Sentieo this year. We’ve also released a dynamic synonym suggestions feature for Document Search based on our own, internal synonym search tool. Additionally, we added company-specific autocomplete suggestions to our search. And earlier this year, we rolled out Table Explorer, a flexible and auditable tool that identifies, chains and visualizes tables in SEC filings. 

During the next few days, we will be selecting and publishing our highlights from current transcripts to show how effective Smart Summary can be in your research workflow. (Stay tuned).

For example, if we look at the transcript from the Goldman Sachs call last week (below), we can pick up essential corporate and macro information (color-coded as needed), under the Financials and KPIs classification. Scrolling down in the Smart Summary, we see record assets under supervision: good news in green, versus slower Chinese GDP growth in red, a couple of paragraphs down. The full context is right there as well. 

In addition to viewing by Classification group, users can quickly scroll through all positive and negative highlights, regardless of Classification. 

In the Key Terms field, we catch up on Marcus, Goldman’s growing consumer banking franchise. We can see a mix of positive and neutral statements. 

For the next few days, the blog will be highlighting exactly how we’re applying this powerful new functionality. To try it yourself, please get in touch

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Disrupting Transcripts: Introducing Sentieo’s Smart Summary

Just in time for earnings season, Sentieo is releasing Smart Summary, a whole new way to read transcripts. 

We all know the problem that analysts and portfolio managers face four times per year: multiple companies reporting on the same day, which creates impossible scheduling conflicts, work overload, and forced prioritization, which then leads to costly missed information.

Analysts might dial into one or two consecutive high priority calls, and then go on to read another four to eight transcripts later in the day, depending on coverage. These transcripts are always read chronologically, starting with the boilerplate language on top, and ending with the analyst questions. 

Until now. 

With Sentieo’s new, ML-driven transcript Smart Summary, we enable analysts to pick up the important information across multiple classifications, such as guidance and KPIs, while skipping over the “great quarter, guys!” parts. The segments based on these classifications can either be seen highlighted in the transcript itself or extracted, with context, in a special field. The text is also run through an NLP screen and color-coded in green or red, if needed, with enabled clickable user ratings that will continue to improve the accuracy of the learning system. In addition, Smart Summary offers keyword extractions, enabling readers to view text related to these surfaced key terms. 

These features empower analysts to get the essential information in minutes, saving valuable time during the busiest periods of the year. The benefit of the ML-driven Smart Summaries does not end with faster information processing or expanded coverage; it also ensures that analysts are not missing important information on their last few transcripts at the end of the workday. 

Below we are looking at Facebook’s latest quarterly call transcript, and scrolling down to the Guidance classification text:

Below we are looking at the same Facebook transcript, but reviewing the Whatsapp key term text:

Another aspect of Smart Summary is “Table View,” which enables active sorting of sentences by the Classification score (ie. “which sentences have the most guidance language?”). This adds another layer of improved accuracy and productivity to the analyst workflow. 

The Table View is also available for surfaced keywords. Analysts can see useful statistics, like whether a keyword is new, or whether it got dropped. They can also see whether usage, by either management or analysts, is going up or down. This type of quantitative insight for keywords was previously so labor-intensive that it was rarely done, and only for one or two key terms at most.

 

How did we build Smart Summary?

We spent countless hours training a machine learning model on a very large number of transcripts across all industries, effectively automating what an analyst would do. Once the model was up and running, we spent a lot of time on corrections and fine-tuning for this official release. 

Smart Summary is a blockbuster new addition to the Sentieo platform that serves our overarching mission: augmenting human decision-making through the latest technological tools. The release is a part of the latest ML/NLP update to our industry-leading Document Search, which now also includes the surfacing of synonym suggestions based on a machine learning tool trained on millions of corporate documents. (We will discuss this in an upcoming blog post).

 

To see how Sentieo’s complete workflow solution can work for you, please get in touch

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Guide to Using Alternative Data In Equity Research to Deliver Alpha: The 13 Stock Picks for H2 2019

Alternative data has become a mainstream source of data for investment managers, with up to 50% of funds now using it as a part of their research process. The question of how to get value from alternative data is no longer about access to the data sets; there are hundreds of vendors offering alternative datasets or services. Rather, it is a question of how to make that data useful to every equity analyst driving investment strategy.

Download the Picks Whitepaper now.

Large funds have made multi-million dollar investments in data science teams and big data infrastructures in an attempt to win an alternative data arms race that is predominantly driven on the hope of finding the needle in the haystack, big bet investment. However, with our 13 Alternative Data Stock Picks, we have proven that the most successful approach to alternative data is to directly embed it into the core research workflow for analysts, effectively democratizing alternative data.

This guide outlines how we used the Sentieo platform to pick our initial 11 stocks from the first half of the year, the performance of these stocks, and our Alternative Data Picks for the second half of 2019.

How Sentieo Makes the Alternative Data Stock Picks

For both the original Sentieo 11 and the new Sentieo 13 picks, we used the same methodology:

We started with the Sentieo Mosaic screen, where we looked for:

  •     A high correlation between the alternative data composite and revenue growth and/or KPI
  •     Large acceleration in the alternative data (our proxy for end-user demand) versus the consensus expectations

These correlations and significant changes in trends are what drive analyst usage of Alternative Data.

Usage of Alternative Data in Mosaic is easy to customize and is completely transparent: users can see basket weights, as well as data set performance for different time frames.

Our next step is to marry the broad screen results with our team’s 60+ years of collective fundamental, qualitative investing experience. Sentieo augments human decision-making: the charts and the stats will not give you the “why.” We do not adhere to specific investment style boxes, but we do look for revenue growth as the single largest driver of long-term results. No business ever shrank its way to greatness.

The ideal picks have strong revenue growth because they:

  •     Operate in high-growth industries, supported by long-term secular megatrends
  •     Are the leaders in their respective industries
  •     Tend to be underpriced relative to their growth rates

As a result, this set of long ideas has relatively high near-term P/E. We also looked at earnings momentum through a combination of the classic earnings upwards revision, plus our alternative data Mosaic index. Most alternative data sets do come from consumer-generated data, and most of our picks are in these two broad groups. As more and more consumer behaviors shift to digital, we expect to see the alternative data sets become more and more predictive.

Sentieo 13 H2 2019 Alternative Data Picks

Our latest set of picks is based on exactly the same methodology as before, but we have expanded our focus a little wider. Note: These are not stock recommendations, and we are sharing them to show the power of the Sentieo platform in bringing together the power of a complete financial research platform with both traditional and alternative datasets.

1) SNAP

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2) PLNT

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3) TWTR

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4) CROX


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To see Sentieo’s 9 other picks, download the full whitepaper here.

We’ll also be discussing all the picks and how we made them during our upcoming live webinar, featuring Sentieo’s CEO, Alap Shah. Register here.

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Disclaimer

The content of this report references opinions and is presented for product demonstration purposes only. It does not constitute, nor is it intended to be, investment advice or recommendations. Readers should assume that Sentieo staff members hold direct and/or derivative positions in all securities mentioned, and may transact in any and all of these securities, at any time, without notice. Seek a duly licensed investment professional for investment advice. Sentieo is not registered in any investment advisory capacity in any jurisdiction globally.

The 7 Habits of Highly Effective Analysts: The First 3 Habits

Why Make Effectiveness A Habit?

At Sentieo, we care about helping equity analysts become more successful. It is core to our mission as a company. While we have broadened our purview to finance and general knowledge professionals, we still have buy-side in our DNA. Our CEO and co-founder, as well as many of our executives and product owners, were analysts in their previous lives.

The mountain of data that analysts have to process to find nuggets of unique truths is growing more massive each year, leading to information overload. In the face of these challenges, we still believe there is a role for human analysts, augmented with better technology and process to help them fight off those challenges. Thus, we’ve updated our most popular whitepaper, The 7 Habits of Highly Effective Analysts. Read the preview below, or download the whole thing!

Looking Beyond The Echo Chamber For Ideas

The world of finance tends to be an enormous echo chamber where even ostensibly intelligent participants can get caught up in manias and panics of groupthink: how much of your communication is with fellow buy-siders versus outsiders? We actually found it more instructive to steal ideas from outside of finance.  

All three of the above have similar constraints on resources and relevance to the ultimate research output. Of course, we don’t think there is any better authority on general personal effectiveness than the original Franklin Covey book (The 7 Habits of Highly Effective People), which also obviously served as an inspiration for this paper.

 

Three Individual Equity Analyst Habits:

 

1) Be Proactive: Optimize Your Coverage Universe and Expand Your Circle of Influence 

You only have so many hours in a day. Valentine (book referenced above) and most major hedge funds recommend covering up to 40-50 stocks at most. If you can’t find a good idea — long or short — in those, you are doing something wrong. If you are trading hundreds of stocks a year, you are going too broad to have any edge over quant-driven processes (and probably paying too much in commissions). The only way humans will have a sustainable and permanent advantage in investing is by doing deep fundamental research. Fortunately, we at Sentieo are continuously working on building technology to augment, not replace, the human. The universe of thousands of stocks can be hard to narrow down. Luckily, Sentieo’s platform has a built-in powerful screener with thousands of categories just for that purpose. 

Use Sentieo’s Screener to filter down to the companies you care about.

Once they have a sensibly defined investment universe, effective equity analysis are ready to go deep. Buy side analysts have a wealth of broker research resources at their fingertips, but often drown in the floods of daily push emails. Your inbox is valuable real estate; the most effective Equity Analysts access information on a “pull” basis—on demand, instead of having their time and attention demanded by outside parties.

Analysts should approach search with a specific intent in mind, and gather as many relevant facts as possible. Sentieo enables this by bringing users access to the full spectrum of Broker Research inside our Document Search platform.

Drill down by document type (or even document section) to only get the information you want. 

 

2) Begin With the End in Mind: Don’t Miss the Macro for the Micro, or the Structural for the Near-Term

All too often, analysts get worked up about basis point moves and minor catalysts when they should be focused on the tectonic shifts under their feet. Think beyond the movements of macro model inputs like commodity costs and currency fluctuations. The shifts from major global trends, ranging from “Software Eating the World” to regulatory and political shifts can serve as either incredible headwinds or tailwinds to investment theses that can far outweigh any modeling considerations for the next fiscal year.

Models are only as good as the assumptions going into them, and no amount of Excel wizardry will help if, for example, you try to buy the dip in global mining stocks ahead of a Chinese slowdown, or you seek value in consumer packaged goods while well-funded startups (instead of stale brands) are gaining ground in every category.

Although one should constrain their coverage universe (see Habit 1), no stock is an island. Our platform allows effective equity analysts to quickly get a read across adjacent sectors, to stay informed through plotting market data and document mentions. 

Sentieo’s Search Summary Analytics give you insight into the most keyword mentions by Company, Document Type, Sector, and Region

 

3) Put First Things First: Maintain A Catalyst Calendar and Do The Work Well Ahead

Stocks often run ahead of earnings. It is not an infrequent occurrence for a company to beat, but trade down. This cues puzzled commentary from the Street about the “inexplicable” reaction, while a 30% pre-earnings run-up was ignored. Funds need to be sized up at the start of these pre-event moves, not just the day or week beforehand. The proactive analyst with this end goal in mind should maintain a priority list that includes a catalyst calendar, and should ideally organize their work around the profit potential.

Key catalysts to track include earnings announcements, product launches, and transactions. Sentieo’s Calendar can feed in from a user’s watchlist, and it makes the forward calendar plain as day:

Track your tickers using an earnings calendar in Sentieo, on both desktop and mobile.

These are just 3 of the 7 Habits of Highly Effective Analysts. To read about all 7, download the full white paper. 

 

Missed Our “Ask Us Anything” Webinar? Here Are Your FAQs About Sentieo’s Dashboard, EDT, Screener, and Mosaic

Last month at Sentieo’s New York office, our Head of Research, Nick Mazing, hosted a two-hour “Ask Us Anything” live webinar. Nick answered questions from Sentieo’s current and prospective users, covering the many functionalities of the platform. In this post, we will share a few FAQs about Sentieo’s Dashboard, EDT, Screener, and Mosaic features.

Dashboard FAQs

How do I customize my Dashboard to fit my personal research workflow?

The Dashboard is the highly customizable screen that a Sentieo user can utilize to:

  • Monitor multiple financial and alternative data metrics for a list of stocks
  • See internal work being done on positions
  • See any documents coming in (such as new press releases or sell-side reports)
  • Get alerts on their saved searches

Extensive customization allows this screen to be just the way you need it to be, and it lets you save time with one quick look over everything that matters to you.

Mosaic FAQs

Mosaic is Sentieo’s alternative data module. Sentieo takes several data sets and does correlations against past performance to determine the optimal weights of these sets in the “basket.” We are completely transparent: you can see past performance (R-squared and hit rate), and you can see the basket weights.

Can you show us a couple examples on how to use Mosaic?

In this example, we looked at the individual brands mapped for Capri Holdings (formerly Michael Kors), Abercrombie and Fitch. We also looked at how investors could have avoided a 90%+ loss in Blue Apron shares by monitoring the Sentieo Index.

How did you come up with the Sentieo 11 stock picks in January?

Nick went over the popular eleven stock picks that we released in early January, which did really well. We look at the performance of the list, the alternative data that was used, along with the fundamental “overlay.”

Equity Data Terminal (EDT) FAQs

Sentieo’s EDT has everything you’d expect in terms of data for an individual equity, plus a lot more.

How do I try online “consensus” income statement models in EDT?

Nick showed how users can quickly enter their own assumptions about future growth, margins and multiples, and compare against the consensus. This function enables fast idea pre-qualification, saving you and your team time to focus on ideas that could “work” at a first pass.

We show a specific example, Royal Carribean, where we use our own estimates for sales growth, gross margin, and multiples to arrive at an internal price target above the current.

We also looked at the estimates/surprises and seasonality of returns for Royal Caribbean (RCL).

How do I use Plotter to visualize this?

Nick went to Sentieo’s data visualization tool, Plotter, to analyze further. He explored revenue and EBIT seasonality, compared it to the actual underlying cash flow, and then he calculated EBIT margin along with some descriptive statistics.

Revenue, earnings and other estimates are a popular feature in Sentieo’s Equity Data Terminal (EDT). We go over one example of the beats/misses function along with the classic “estimates revisions” page that shows changes in estimates by year and rolling NTM. Finally, we show how to export these to Sentieo Plotter, where users can overlay many other data sets.

Screener FAQs

Sentieo’s Screener is very powerful. There are thousands of possible options to screen on: not just by widely available financial metrics, but also by CAGRs and percentile ranks inside these metrics. Nick showed his “Large Cap Quality and Momentum” saved screen to illustrate.

Want to try using Sentieo yourself? Request a trial here.

Here is What Corporate America Is Doing for Pride Month

Sentieo values diversity and believes that diverse teams make innovation possible. (We are hiring!). One of the exercises that we are doing for Pride Month is taking a look at how Corporate America is celebrating, by using our industry-leading Document Search technology. Check out our findings below.

Pride Month Is Growing! 

Mentions of “Pride Month” in US corporate press releases for public companies were practically non-existent in 2012, but in 2018 and 2019, we see about 20 press releases. (Interactive chart)

Who Were The “Early Adopters?”

Our search results show that Hyatt, Marriott, PNC Bank, Comcast, Macy’s, Southwest Airlines, The Knot, and CBS were talking about pride in 2012-2013.

 

What Caught Our Eye In 2019?

Chipotle is rolling out limited edition gear to benefit The Trevor Project (a suicide prevention organization). (See full press release here).

 

Baidu now has a special Pride edition for its Facemoji keyboard app. (See full press release here).

 

United Airlines is hosting its first ever Drag Brunch at Newark Airport. (See full press release here).

 

UGG (part of Deckers Brands) unveiled a footwear collection to benefit Lady Gaga’s Born This Way foundation. (See full press release here).

 

Zillow compiled data on housing cost premia in many “gayborhoods” nationally. (See full press release here).

Lady Gaga is hosting a first-ever concert at the Apollo for SirusXM+Pandora. Sorry, invite-only. (See full press release here).

We’re excited to celebrate Pride this month, while also keeping an eye on trends using DocSearch.

If you would like to learn more about search best practices, please join our webinar on Thursday!

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Missed Our “Ask Us Anything” Webinar? Here Are Your Most Common Questions About Sentieo’s Table Explorer and Plotter

This month at Sentieo’s New York office, our Head of Research, Nick Mazing, hosted a two-hour “Ask Us Anything” live webinar. Nick answered questions from Sentieo’s current and prospective users, covering the many functionalities of the platform. In this post, we will share a few FAQ’s about Sentieo’s Table Explorer and Plotter features.

Table Explorer FAQs

How do I save time when handling 6, 9, and 12-month cumulative reported numbers (such as Cash Flow Statements) using Table Explorer’s “Quarterize” function?

Unsurprisingly, this was the first question that came in. Table Explorer is a very popular feature that we released earlier this year. It identifies and chains similar tables for fast collection of “as reported” financials in an easily auditable and workable format. One of the challenges with using reported financials is adjusting cumulative cash flow line items; it is not hard, but it takes time. Here, we show how to do this in literally two clicks. Add a Q4 column and Quarterize.

How do I analyze reported KPIs?

Table Explorer will chain all “similar” tables in the filings going back years. So as long as the company has been reporting KPIs in a somewhat consistent format, Sentieo Table Explorer will chain them going back 10+ years. You can then export the tables to Plotter and add other data series (ie. rolling valuation, or alternative data such as search trends, or macro indicators).

How do I explore an idea from macro to micro?

To answer this question, we started with a transcript search searching for wage inflation, identified the restaurant industry as an industry that talks a lot about wage inflation, showed the search statistics in Plotter, overlaid with a macro indicator. We then used the search statistics to identify The Cheesecake Factory as a company that talks about the topic a lot. So we located the labor expense line with one query that saved us time digging through filings and tables. Once there, we used Sentieo’s Table Explorer to chain that table going back for a few years. We quickly visualized the trends in labor expenses and in operating income, as a percentage of revenue, to get an idea of what is going on.

How do I use Table Explorer to chain and visualize line items and KPIs from reported financials?

We dig into Royal Caribbean (RCL) and visualize many reported expenses to get insights on what has been going on with the business. We utilize our easy switch to Common Size and YoY% growth for all line items to see the full picture.

Plotter FAQs

Can you show financials in Plotter?

Sentieo’s Plotter is our versatile data visualization tool. In addition to choosing from a wide menu of available data sets, users can also do a variety of calculations using these data sets. In this example, we pulled the past and estimated quarterly revenues for Home Depot and Lowe’s, and ran a correlation between these two data sets in three clicks.

Does Plotter integrate FRED macro data?

Our clients welcomed the recently expanded FRED macro data integration in Sentieo Plotter. We went over a quick example how to combine macro data with price data for a sector ETF.

How do I chart multiple datasets in Plotter?

Sentieo’s Plotter offers many data sets, from financials to macro series, to alternative data, to your own uploaded data sets. We show how to bring up KPIs in the tool for three casual dining stocks, and how to calculate a “mini-index” KPI average.

Missed the part of the webinar about DocSearch? Get updated here.

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5 Questions To Ask Your Search Tool Vendor Before You Renew

The most important aspect of a financial research process is how quickly and confidentially an analyst can get to an investment thesis, market analysis, or corporate strategy recommendation that comes out of the process. Unfortunately, legacy financial document search vendors are failing to recognize this. Instead, they simply push the idea that they are improving how you search for documents.

In this post, we’ll outline 3 key questions to ask your legacy document search vendor before you commit to another year of using their platform. To find out the other 2, download the full visual whitepaper.

1. Why do they make it so hard to get to actionable data?

The data that analysts need to build an investment model or competitor/market analysis model is typically buried in a variety of places across filings, transcripts, and presentations. Data such as product-specific growth data, wage inflation estimates, or C-suite compensation packages are all in separate tables or in text format within these documents. With legacy search vendors this means your high-value analysts spend hours copying and pasting or doing data entry work, instead of building their models.

With Sentieo we make it easy to get to actionable data:

  • Table Explorer delivers the ability to extract data points from all of the documents searched, but also helps analysts build multi-year tracking models by bringing together data from historical documents. This dramatically reduces the time spent on manual, low-value work.

  • Analysts can visualize trends and plot their new dataset with a couple of clicks, further cutting the time from search to insights.

2. Are they really delivering on AI that helps your analysts get the information they need?

Financial research platforms and search tool vendors have made a significant number of claims to be using AI to drive innovation in their platforms. However, as you make a long term commitment to a contract, it is worth asking whether they have delivered on these claims:

  • How many engineers are working on features that actually reduce the time spent by your analysts finding what they need? This is a proxy for understanding whether they are delivering on their AI promise or just “AI washing” their product.
  • What specific features have come online in the past year, and what is planned for the next year that uses AI to improve the productivity of your team?

Sentieo has made use of AI to directly solve financial research problems:

  • Over 75 engineers work on our platform, the majority of whom are working on features to support the analyst research process. One legacy vendor, Alphasense, has just 30 engineers (Source: LinkedIn May 21st 2019)
  • In just the past 6 months, Sentieo has delivered:
    • Table Explorer to automate the process of extracting and chaining data together directly from filing documents
    • NLP-driven synonym system, with thousands of synonym groups and the ability for users to request more
    • Contextual search, allowing users to search content in specific sections of filings or on attributes. For example: whether a CEO mentions a specific topic in a transcript
    • Search autocomplete, search within a search, and ever more Boolean operators.

3. What is more important: the number of documents a search returns, or the specific data or insights an analyst is looking for?

More search results do not mean more alpha: better search results mean more alpha.

Many search vendors will cite the number of documents that they will return from the platform as a competitive comparison, without acknowledging that they are comparing standard settings instead of platform capabilities.

However, what is most important is how quickly an analyst can get to the specific information they are looking for. Traditional search providers will tell you how many times a search term appears and how that has changed over time, or provide filters that are more suited to an online shopping experience, but will not make it easy to get the actual data or document you are interested in.

Sentieo accelerates the process of getting to relevance with:

  • Search analytics that allow analysts to rapidly hone in on the most relevant set of documents or data based on attributes like ticker, industry sector, geographic region, or market capitalization. This dramatically reduces the time they spend searching through documents, and allows them to focus on building their investment or strategy thesis.

To find out the other 2 questions to ask your search tool vendor, download the full visual whitepaper.

To try Sentieo for yourself, request a free trial here.

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The Chewy IPO: Digging For Treats In SEC Filings

PetSmart Inc.

The Year of the IPO continues! We wrote about the parallels between Pinterest and early Facebook, we did an extensive Slack S-1 read-through, and we highlighted what Uber and Lyft are saying about autonomous vehicles in their filings.

With a high-profile IPO like Chewy coming up, an analyst faces two challenges: since the company is a unique, fast-growing asset, the analyst has to triangulate possible valuation ranges for the offering as there are no direct comparable. Contrast this, for example, to a quick-serve restaurant chain seeking an IPO: there are tens of comparables to choose from. The second challenge is that the pre-IPO valuation work has to be done quickly so that the team can decide whether to pursue the idea further: the opportunity costs on time spent in dead ends in investment management can be extraordinarily large. Using Sentieo, we were able to pull trading data on active and delisted tickers, as well as transaction multiples from fairness opinions, in minutes, ready to be compared against the proposed IPO price range, and to be presented to the team.

After Chewy’s first IPO filing in late April (latest S-1/A here), we are looking at what we can learn about pet industry valuations — both from trading data and from what is buried deep in SEC filings — in the form of fairness opinions filed around M&A activity in the sector.

Chewy (CHWY) does not have direct US comparables. There are no other dominant online pet food or pet medicine specialists. There used to be two publicly traded “pure play” pet food companies: Blue Buffalo (old ticker: BUFF) and FreshPet (FRPT). FRPT still trades, while BUFF was taken over by General Mills.

FRPT pioneered fresh, refrigerated pet food that is delivered to stores and sold in branded coolers, in contrast to Chewy’s online model of shelf-stable food combined with a large subscription business. After a rocky post-IPO start, FRPT is in the middle of a successful turnaround, and the company is currently trading at around 6.5x EV/NTM Sales and at around 48x EV/NTM EBITDA. Interactive chart

FRPT EV/Sales and EV/EBITDA

BUFF, on the other hand, offers traditional, shelf-stable food. BUFF was acquired by General Mills last year, and was trading at 5.7x EV/NTM Sales and 23.1x EV/NTM EBITDA at takeover time. Interactive chart

BUFF EV/NTM Sales and EV/NTM EBITDA

Since the General Mills-Blue Buffalo transaction was likely cited in fairness opinions, we searched all Consumer Staples company filings for tables that contain “Blue Buffalo.” We found one right away, literally the first result: Pinnacle Foods’ filings around its takeout by ConAgra Brands (CAG) (Full document here). We see that there are three recent pet food transactions that are of relevance to our work on CHWY: BUFF taken out at 25.5x EV/LTM EBITDA, Ainsworth Pet Nutrition at 20.0x, and Big Heart Pet Brands at 15.1x.

Blue Buffalo

Going beyond food, we also took a look at the pet health players. There are three segments that we looked at: pet/animal pharmaceuticals, pet hospitals, and pet health insurance. There are US publicly traded companies in the pharmaceutical and the insurance space.

On the pharma side, we took a look at Idexx Laboratories (IDXX), Zoetis (ZTS), Elanco Animal Health (ELAN), and Phibro Animal Health (PAHC). We can see that the median animal pharma name is trading at 20.4x NTM EV/EBITDA.

Comparable Analysis

There is one US/Canadian pet health insurer trading publicly: Trupanion (TRUP). While pet insurance belongs in the property insurance category, TRUP has been trading more in line with software names, and less so with P&C insurers, which has resulted in a lot of short-seller activity, including published reports and an increased short position as a percent of float. Interactive chart

Trupanion (TRUP)

On the veterinary side, we searched through corporate filings for tables containing VCA (old ticker “WOOF”), a marquee $10 bn transaction. We found a detailed fairness opinion in the filings of Abaxis (ABAX), acquired by Zoetis (ZTS, mentioned above). We see that precedent transactions in the veterinary distribution and the veterinary hospital sectors have been done at 14.5x-15.0x LTM EBITDA multiples. See full filing.

VCA (old ticker “WOOF”)

Finally, we also know that Chewy is currently owned by physical pet retailer PetSmart (old ticker “PETM”). PetSmart itself was public, and was taken private in early 2015. We see that the comparables on file from that time look at physical retailer comparables to arrive at a median 9.7x LTM EBITDA. Full filing here.

Petsmart, Inc.

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