Sentieo Announces $6M in First Institutional Round of Funding Led by Clocktower Ventures and Long Focus Capital

SAN FRANCISCO, March 27, 2018 – Sentieo, the next-generation financial research platform, today announced $6 million in funding led by Clocktower Ventures and Long Focus Capital. They are joined by angel investors including former Thomson Financial CEO David Flaschen, StockTwits Founder Howard Lindzon, Adobe CPO Scott Belsky, Moat President Aniq Rahman, and several top executives from leading investment managers. The funding follows a year of exponential growth for Sentieo, where the company tripled its client base and more than doubled its employee count. Building on this momentum, Sentieo will use the new capital to expand its platform offerings and accelerate global growth.

“As former financial analysts ourselves, Sentieo was born out of a very personal need for better tools to aid investment decision-making and Alpha generation,” said Alap Shah, CEO and cofounder of Sentieo.

“We applied our own experience to create a unique, multidimensional solution that provides clients with the powerful and intuitive tools that they need. This latest round of funding positions Sentieo to continue building out the platform, while further accelerating growth.”

Read the full press release here.

Analyzing Promotional Activity in the Sportswear Industry with Alternative Data ($NKE, $UA, $ADS:GR)

The global sports industry is huge, estimated to be around $1.3 trillion. Within sports, the sportswear market is a great place for investors looking at strong brands in a large and growing market.

Recently, the sportswear industry has seen a rise in promotions and discounting activity, as have other segments of the retail industry. A combination of factors such as a decline in tourist spending, slowing foot traffic and a negative consumer spending environment has affected the majority of companies in the space, limiting their growth potential and pricing power. These headwinds, together with the companies’ aggressive expansion plans and excess inventories (as is the case for Under Armour and, in part, Nike), has triggered a rise in promotional activity by many players.

In order to understand the current status of inventories in the industry and to verify the balance between supply and demand, it’s necessary to understand how promotional activity is evolving.

Sentieo’s Mosaic product allows investors to get a clearer idea of how promotional activity is evolving in the sportswear and athletic footwear markets by looking at alternative data, giving analysts a view into the current sources of pressure on gross margin.

Using Twitter Mentions, we can build queries to track the number of mentions of any word or combination of words. Twitter is one of the most important social media networks for businesses, and every brand and third-party retailer in the sportswear and athletic footwear industry promotes on the platform. Let’s go directly into the chart below to see how Nike’s promotional activity has evolved over the past three years.

Sentieo nike promotional activity

The chart shows the 30-day moving average for the number of Twitter mentions for promotional activity, including phrases such as “Nike discount,” “Nike 30% off,” “Nike clearance,” and so on. We can see that promotional activity was particularly intense between 2015 and 2016, but declined substantially in more recent times. It has been very slow since the beginning of 2018, reaching a four-year low.

Now that we have an idea of how Nike’s promotional activity has trended, let’s look at Adidas. Adidas is Nike’s main competitor, and its successful expansion strategy for the past few years has diminished Nike’s market share and created more opportunity for other smaller competitors. It has limited the American giant’s growth both internationally and in the domestic market. As we can see in the chart below, Adidas’ discounting mentions were lower during the high-growth phase between 2015 and 2016, while Nike was facing strong competitive pressures and engaged in more aggressive promotion. The situation has changed in the recent past, with Adidas’ promotional activity increasing significantly in 2017 and remaining a bit higher than it was in 2015/2016.

Sentieo Adidas

The data clearly shows that the situation has reversed in comparison to last year, and the Adidas brand, for one reason or another, has shown an increase in promotional activity, while Nike has moved in the opposite direction.

Let’s look at another interesting name in the industry: Under Armour. Under Armor has enjoyed years of aggressive expansion with revenue growth rates around 27%-32%, some of which can be attributed to the increasing popularity of its endorser, basketball star Stephen Curry. However, the growth rate plummeted from 21.8% in 2016 to just a bit above 3% in 2017.

Sentieo Under Armour

 

Under Armour’s aggressive expansion plans backfired and a strong imbalance between supply and demand generated a steep increase in inventory levels, which reached 23.3% of revenue at the end of 2017, compared with 19.7% in 2015 and 17.4% in 2014. It shouldn’t be a surprise that promotional activity skyrocketed in the second half of 2017, which was a necessary response to the alarming rate of inventory build-up. The chart below shows that mentions of promotional activity reached a historical high in December 2017.

Sentieo Under Armour promotions

Sentieo’s alternative datasets have allowed us a unique view into key industry dynamics like promotional activity, one of the primary drivers of margin pressure in the sportswear industry.

Investors and analysts should take these insights into account when they assess the attractiveness of the aforementioned stocks; datasets like Twitter mentions can definitely shed light on the probable direction of margins.

While we were looking at promotions, we looked at alternative data to forecast Nike’s next quarter using Google Search Trends data. Google Trends tends to lag Nike’s revenue growth by about a quarter and recent trends seem to indicate that they make not make the growth target for next quarter. It’s still early, however, and the most recent month of data has not fully come in yet.

Nike Sentieo

Search of the Month: Retail Same Store Sales Breakdown

This is the second in our Search of the Month series. Check out the first article here! E-mail us at hello@sentieo.com with powerful searches that you think should be featured.

If you’ve ever tried finding details of revenue growth drivers for companies in the restaurant or retail space, you may have found it difficult. That’s because this information is not broken down in GAAP metrics or other standardized financial reporting, but it tends to be discussed in quarterly earnings calls.

Normally, an analyst would need to listen to the call or dig through the transcript looking for these numbers, but using Sentieo they can find it with a simple search and save it for later use.

There are components to retail sales growth that are typically discussed on earnings calls:

(1) Opening more stores and (2) comparable store sales, which breaks down into:

a. Selling more at existing stores (more transactions)

b. Increased pricing per unit (higher average ticket size)

We opened up DocSearch and entered the following query: transactions NEAR10 OR(increase decrease). This brings up references to increasing or decreasing transaction volume along with synonyms. We used NEAR10 because the word transaction might be before or after the indicator of change and might not be right next to it.

We narrowed down our search to mentions within earnings call transcripts:

Sentieo

Then we also filtered down by sector:

Sentieo

We got some interesting results. We found Floor and Decor Holdings (FND), whose team had their Q4 2017 earnings call a couple weeks ago.

Sentieo

Their call included the following mentions of transaction growth:

Sentieo

The quote above tells the following:

  • Comparable store sales increased 16.2%
  • Comp increase was driven largely by transaction growth (more transactions)
  • Transactions increased for the year
  • Average ticket size increased for the year (Prices increased)

It would have been difficult to have found this information outside of Sentieo, but we found it in seconds, with just a few clicks.

The Habit restaurant chain reported earnings on 2/28, and provided even more detail:

The comparable store sales decline of 1% was broken down into a transaction (traffic) decrease of 3% and an average transaction amount increase of 2%.

Searches like these can help you quickly isolate the important information you need and incorporate it into your research without spending extra time poring through documents.

Advanced User? Try These Queries for More Focused Results

If you’re an advanced Sentieo user, you can make this query even more precise by removing synonyms of increase and decrease that could produce false positives for this search. Normally, you would use quotes (“increase”) to search for exactly those words and exclude synonyms, however, this would also exclude stemming, which is helpful for this case. Stemming allows you to not only search for a specific keyword, but also to find the variations of the stem of the keyword. Using our example above, let’s say we want to search all variations of the word increase, such as increased, increasing, increases, but not improve, higher, or growth. To include these words, we’ll need to put carets in front of the main stem keyword instead of putting quotation marks around it (^^increase). These will turn off synonyms but leave on stemming.

The final search would be: transactions NEAR10 OR(^^increase ^^decrease)

Sentieo notebook conferences

Sentieo’s Guide to Conference Season

As earnings season winds down, equity analysts start thinking about investment bank conferences and upcoming meetings with management. While the largest concentration of conferences happens in July and September, conference season happens year-round, so we thought now would be a good time to share our guide.

As conference season begins, you’ve got a lot on your mind. You and your team are getting ready to catch a flight, prepping for multiple days of back-to-back meetings. You want to be as prepared as possible, to ensure that you get the most out of your time away.

As former analysts, we’ve been in your shoes, so we put together a quick guide to help you out.


Get Mobile

When you’re on the road, your mobile device is your best friend. Don’t miss anything while you’re gone; use a mobile cloud software that allows you to review documents and financials while traveling — anywhere, anytime.

Reference financial data and prior conference transcripts on your tablet and phone during meetings with management, so your questions are sharp and you get the most out of your meetings.

With mobile access, you won’t fall behind if you’re away from an onsite data terminal. (And try not to forget your phone charger at home).

 

Prep Your Questions

Prepare and store your questions for conference meetings within a system that you can access while you’re in the meeting room, ideally from your mobile device. You’ll need a mobile app that stores any notes made by you or your team.

As the meetings occur, keep organized and also take notes within your mobile app. Tag them by ticker, topic, or your own keywords for easy retrieval after the trip.

Use note templates to have your questions ready and make sure you capture all the necessary information. Check out this example in Sentieo:

Go to your Sentieo Notebook, and choose your pre-made note template.

Sentieo template notes

 

Add your notes for the meeting, and save with the appropriate tickers and tags, for easy retrieval when you get back to the office.

 

Here are some topics you may want to ask questions about:

  • Emerging competitors 
  • Competitive positioning
  • Organic growth
  • Key drivers of standard and one time costs
  • Capital allocation
  • Capex
  • M&A
  • Dividends
  • Buyback
  • Problem areas/weaknesses the company is facing
  • Plans for raising capital

 

Collaborate with your team in real-time, whether or not they are at the conference, to ensure that you maximize the value of your meetings.

Add images from presentations that haven’t yet been released publicly directly in your notes so you don’t lose them.

 

Listen Carefully and Read Management’s Body Language

Management presentations will typically seem optimistic, but look for clues and ask tough questions to get to key nuggets of information. Try to scope out and take notes on indicators such as:

  • Management speaker confidence
  • Openness about risks (generally thought of as a sign of genuine enthusiasm)
  • Covering one’s neck (i.e. subconsciously seeking to protect a vulnerable part of their body) is a sign of discomfort, as is adjusting a tie, loosening a collar, or rubbing the forehead.
  • Executives who are uncomfortable with what they are saying often use “distancing language,” changing pronouns from “I” and “we” to “the company.”

Some other things to look out for in management presentations:

  • Comments on liquidity: trends in cash flow (or lack there-of) on balance sheet
  • Use of credit lines (are they too dependent on these?)
  • Press activity (press releases, PR firm hiring, poaching talented executives, new product announcements, focus on research and development, or R&D)

 

Network

When there’s downtime, talk to people from other teams and make friends. Your conversations could spark an idea, or you could make a valuable connection.

 

Investment Bank Conferences in 2018:

We compiled a list of webpages with the dates for investment bank conferences, below for your reference. There are a few large banks (Goldman Sachs, Morgan Stanley) and smaller firms that do not have lists, but this should help you make sure you don’t miss any upcoming conferences.

 

Keep organized, and enjoy conference season!

 

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