As buyout multiples have climbed and capital piles up in private investment funds, acquirers have been looking for a competitive edge in their hunt for acquisitions. For some firms, that has meant doing more advanced data analysis.
Uri Gruenbaum is the chief executive officer and co-founder of TipRanks.com, a U.S. website that uses natural language-processing algorithms to scan the internet and rank the stock picks of brokerage analysts, financial bloggers, corporate insiders and hedge funds. Prior to launching the rating service in 2012, Mr. Gruenbaum worked for more than 10 years as a software engineer – developing trading platforms for hedge funds, among other things.
We asked Mr. Gruenbaum about his investing strategy.
How do you invest?
I often look at companies whose products I use personally or through my business. The rationale is that, as a user, I have an edge over other investors in knowing the pros and cons of the product.
I sometimes also get to know people in other companies through my business activities. From such personal encounters, I can get a sense of how these companies compare to competitors, and how challenging it will be to replace their products.
Finally, I focus on finding ways to use market data to make evidence-based decisions capable of generating higher returns. This requires some heavy-duty analysis of databases via computers.
Do you use Tipranks.com for your investment decisions?
I actually log into our system to see what the best-performing analysts are saying about the companies whose products interest me. I additionally try to look at the sell ratings on the company to get the other side of the story.
I also use TipRanks when I am searching for other investment ideas. For example, I will look at what corporate insiders are buying. We found insider activity to be a very strong signal, especially for small-cap and mid-cap companies.
Another way I generate investment ideas is to see what other stocks have been bought by successful investors. So instead of going through reports and analyses, I am harnessing the wisdom of the crowd.
What are some of your current holdings?
My portfolio [as of mid-March] includes Amazon, PayPal, Microsoft, Elbit Systems and Kirby Corp. In total, I have 15 companies and two ETFs in my portfolio.
What is your thinking behind two or three of them?
I believe Amazon will become the biggest holding company – kind of like what Berkshire Hathaway is today but on a bigger scale. The fact that over the last 20 years Jeff Bezos reinvested all earnings in R&D is inspiring.
I see how at TipRanks we love using PayPal for payments and Microsoft Office and Azure cloud. Knowing what we pay them every month and how it is constantly growing makes me feel optimistic about their future, at least in the short-term future.
I am also a big believer in the digital-payment industry and the cloud industry. Amazon, Microsoft and PayPal are all category leaders in these areas.
For Kirby Corp., I noticed that over the last couple of months there were some executives in the company that purchased shares. I opened a position last month – let's see how it plays out over the next year.
What was your best move?
My best investment in terms of profit is Facebook, which I bought a few months after the IPO. I am up about 700 per cent. Recently, I started thinking about closing the position. I see some regulatory challenges ahead. It also seems they are losing some of their user engagement, which is a big issue as there is no simple answer on how to fix user engagement.
Worst move?
A bad investment I made was Potash [Potash Corp. of Sask. Inc.], which has since merged with Agrium [under the name Nutrien Ltd]. I bought its stock in order to diversify my portfolio and increase the dividend payouts. I am down about 50 per cent on that investment.
What analysts on TipRanks.com have impressed you the most?
There are several. One of note is Mark Mahaney, from RBC Capital. I notice too that bloggers from SeekingAlpha.com and InvestorPlace.com tend to perform better than other bloggers.
Any advice for investors?
The best advice would be that if you do not have the passion or the patience to make educated investment decisions, then it would be better to buy ETFs tracking the leading indexes.
This interview has been edited and condensedLarry MacDonald is an economist, author and financial writer.
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