Soft Data and Stock Selection

When it comes to selecting stocks, it’s not solely about pinpointing the right valuations or analyzing hard metrics. It’s vital to remember that markets are driven by human behavior; each trade represents someone else's perspective. My experience in investment banking has taught me that soft data often influences prices more than hard data, especially over shorter time frames. As the saying goes, "in the short run, the market acts like a voting machine."

So, what exactly is soft data? It's the sentiment, discussions, and emotional context surrounding a company. Factors such as analyst opinions, the demeanor of company executives, media portrayals, and customer feedback provide insights that frequently outweigh the hard numbers like profits and earnings.

Consider the companies that analysts rave about, leading fund managers to feature them in newsletters and media outlets. This creates a cycle where increased visibility attracts more investors, driving prices higher. However, when the buzz dies down, so does the price, leading to a gradual decline. In Australia, examples like A2 Milk and the WAAAX stocks illustrate this phenomenon, although I’ve noticed a lack of recent coverage on both WAAAX and FAANG companies.

If you're considering investments, I recommend examining the soft data closely. Investigate how the market perceives the stock:

• Is it currently favored by analysts?
• What is the tone of research notes—positive or negative?
• Are media mentions increasing or decreasing?
• What are the actions of directors—are they buying or selling shares?
• What do customers and the general public think about the company?

There is often a lag between public sentiment and market performance. For instance, negative reviews on platforms like Glassdoor may not immediately impact stock prices until after annual reports are released. This provides investors with an edge: by interpreting market and public attitudes, you can identify trends of optimism or pessimism. Eventually, these sentiments align with market performance, allowing you to avoid pitfalls or capitalize on emerging opportunities.

Wage Transparency

Wage transparency is a topic I would typically explore in depth, but a recent viral LinkedIn post prompted me to address it sooner. The scale of discussion surrounding this subject is remarkable, given that income is a deeply personal and often contentious topic.

Common objections to wage transparency typically revolve around privacy and perceived value. The privacy concern is straightforward: many individuals prefer their earnings to remain confidential, fearing judgment from family or friends. However, wage transparency doesn’t necessarily mean making individual salaries public; rather, it pertains to disclosing salary ranges for positions in job postings. This enables potential employees to make informed decisions regarding job offers.

The value argument posits that individuals earning more in similar roles must be working harder or creating more value. However, this doesn’t negate the case for transparency; in many sales or commission-based roles, performance is already visible. Transparency could incentivize higher performance by alleviating ambiguity regarding compensation, addressing the frustration of hard workers who feel undervalued compared to underperformers.

The benefits of wage transparency are compelling. By publishing salary ranges for various roles, employees can ascertain if they are being fairly compensated and understand how their pay compares within the market. This fosters accountability and openness, potentially reducing discrimination and improving labor allocation efficiency. If the market reveals that certain professions, like mining or specific tech roles, command significantly higher salaries, it may encourage individuals to pursue those careers, thus addressing labor shortages and enhancing economic efficiency.

I strongly advocate for wage transparency, especially in terms of publishing salary brackets for roles. While it’s reasonable for individual compensation details to remain private, everyone deserves assurance that they are being paid fairly.