Big Data / Fundamental Analysis Workshop Held for the AIM Students

The Use of Twitter and Other Micro-Blogs are Examined to Determine if  Consumer Sentiment Trends Can Assist Stock Analysts



Alex Isken in the AIM Room

The seniors in the AIM program are beginning the semester learning about how to expand their fundamental analysis skills by studying 'big data analytics'. This week they have had the opportunity to learn from Dr. Terence Ow (Marquette University, Management Professor) and Alex Isken (AIM 2015 alumnus) about how to access and scrape big data from social media sources, clean and array the data, and conduct sentiment analysis.


Also assisting with the presentation was Dr. Ow's graduate assistant, YiJie Wang. He wrote most of the codes used in Python and R (the statistical analysis). YiJie was an important member of the team that prepared the workshop material. 

We know that various data sources (i.e. Google Trends (https://www.google.com/trends/); Google Analytics (http://www.google.com/analytics/) and  IBM Watson Trend (https://ibmwatsontrend.com/) have been used to monitor macro economic and product trends. Dr. Ow and Alex Isken have shown this week that we can also dive into other social media and micro-blog databases (i.e. Twitter) to extract raw texts and analyze them for individual company trends.

It has been suggested that it is possible to investigate real-time measurements of collective mood states derived from large-scale Twitter feeds to predict the sentiment about a firm’s products or services . This week the AIM students learned first hand how it is possible to use real-time social media feeds to identify trends. They looked at Starbucks in an attempt to determine if various sentiment indicators are correlated with future revenues and the firm's stock price movements.

Alex Isken and Dr. Ow in AIM 'big data' workshop

The AIM students have been given an assignment this semester to conduct their own big data research. They are required to analyze the text content of Twitter feeds over a specific time period to evaluate several sentiment (mood and polarity) tracking tools. They will measure positive (+1) vs. neutral (0) vs. negative (-1) mood and emotional states (i.e. fear, joy, sadness, anger, disgust, surprise, happiness, etc.) and to quantify the sentiment the market holds for individual consumer products and services.

While their research will only scratch the surface of using real-time data, they will learn the basics of coding (using Python), wrangling and arraying data (using Google Refine) and conduct a sentiment analysis (using R statistical software). This assignment will add another potential fundamental analysis tool to their set of skills.

Dr. Ow, Alex Isken and Dr. Krause

Dr. Krause, AIM director,  believes that this is the next level in the evolution of fundamental analysis and that graduates of the AIM program should be comfortable using this method of analysis.

He stated, "We appreciate Dr. Ow and Alex taking time out of their schedule this week to spend time in the classroom with the AIM students. We believe that this type of data analytics will continue to growth in importance across many disciplines. It is with workshops and assignments like this that our students are able to continue to refine their research and analysis expertise. Does Twitter and other micro-blog sentiment trends serve as a predictor of a company’s future relative stock price? We'll see - and when we know - we'll probably not tell anyone!"

Something new: Micro-blogging (via Twitter) during the AIM student equity pitches will begin this Friday

Students will be Tweeting during the AIM equity pitches starting this semester

The AIM student equity pitches have always been one of the main highlights of the program. The opportunity for students to actively manage domestic and international equity and fixed-income portfolios has been an important part of Marquette AIM program’s experiential learning since its inception.

Each AIM student is responsible for closely following a specific domestic or international equity sector (i.e. healthcare, industrials, energy, etc.). The students are responsibility for actively managing the stocks within their sector (making timely buy and sell recommendations that are voted upon by their peers). All AIM students are required to do a minimum of four equity pitches during their tenure in the AIM program.

Starting in January 2016, the AIM program will be integrating micro-blogging (via Twitter) into the Friday afternoon student equity pitches. Students and guests in the AIM Room during the pitches will have up to 140 characters to post comments or questions to the presenter. These tweets will appear real-time on the digital display board in the AIM Room. Those professionals viewing online will also be encouraged to post comments and questions via Twitter at the MarquetteAIM account --- instructions including the proper hashtag will be provided to ‘followers’ of the AIM Twitter account.

The student equity pitches take place each Friday afternoon during the semester – either in the AIM Room or at a local investment company (an activity we have taken to calling our ‘road shows’). The students prepare and distribute a professional equity write-up (note: every AIM write-up since the inception of the program in 2005 is archived here). 

The students are then responsible for making a five-minute pitch before their peers, faculty and any alumni or investment professional in attendance (note: the Friday afternoon equity presentations are also webcast live). Following the student’s pitch the floor is opened for questions and answers for about ten minutes. This has been highly instructive as the students must be prepared to defend their investment recommendation and answer questions in an extemporaneous manner.

Beginning this semester, the students in attendance at the AIM pitches will be micro-blogging their questions and comments during the AIM presentations. Using #AIMpitch within the tweet will enable the students to view the message during the AIM presentation --- which will be shown on the large digital display board in the AIM Room. Using our Rise Digital Display, the various tweets will be posted real-time during the presentations.

The goal of using Twitter during the AIM pitches is to: 

1. provide immediate feedback to the equity presenter; 
2. allow students and professionals in attendance or viewing online to pose questions that require additional clarification; 
3. extend the discussion beyond the student’s 15-minute live equity pitch and Q&A session; 
4. provide permanent documentation of the discussion, questions and responses; 
5. provide students and professionals who could not view the live presentation an opportunity to participate and offer input; and 
6. to help spread information about the AIM program and the student-managed equity presentations.

Please feel free to email the AIM Coordinator, Jessica Hoerres, 

(Jessica.hoerres@marquett.edu) if you wish to obtain instructions on how you can view the AIM pitches live on the web and  how you can post questions and comments via Twitter on the MarquetteAIM account.    

    

A Holding in the AIM Small Cap Fund (EnerNOC) Rose 70% Today!

EnerNOC Applauds Decision by the US Supreme Court in FERC v. Electric Power Supply Association     Monday, January 25, 2016

BOSTON, Jan. 25, 2016 (GLOBE NEWSWIRE) -- EnerNOC, Inc. (Nasdaq:ENOC), a leading provider of energy intelligence software (EIS), applauds today’s decision by the United States Supreme Court in Federal Energy Regulatory Commission (FERC) v. Electric Power Supply Association. This landmark ruling preserves FERC’s jurisdiction over the participation of demand response in US wholesale electricity markets.

“We are extremely proud of our involvement in this seminal case that ensures an important role for demand-side resources in our nation’s wholesale electricity markets. Today’s decision is a tremendous win for all energy consumers, for the economy, and for the environment. We commend the Court and look forward to continuing to help customers actively participate in our nation’s wholesale markets,” said Tim Healy, Chairman and CEO of EnerNOC.

About EnerNOC

EnerNOC is a leading provider of cloud-based energy intelligence software (EIS) and services to thousands of enterprise customers and utilities globally. EnerNOC’s EIS solutions for enterprise customers improve energy productivity by optimizing how they buy, how much they use, and when they use energy. EIS for enterprise includes budgeting and procurement, utility bill management, facility optimization, visibility and reporting, project tracking, demand management, and demand response. EnerNOC’s EIS solutions for utilities help maximize customer engagement and the value of demand-side resources, including demand response and energy efficiency. EnerNOC supports customer success with its world-class professional services team and a Network Operations Center (NOC) staffed 24x7x365. For more information, visit www.enernoc.com.

The Student-Managers of the AIM Funds Have Posted Solid Performance

Performance of the AIM Funds Since Inception of the Program

Marquette University Applied Investment Management (AIM) program was established in 2005. Since then the students have managed approximately $2 million of Marquette’s endowment fund.

·         In September 2005 the AIM Small Capitalization Equity Fund was established with the Russell 2000 Index serving as the benchmark.

·         In January 2006 the AIM Fixed Income Fund was created with the Barclays US Aggregate Bond Index selected as the benchmark.

·         In September 2008 the AIM International Equity Fund was established with the S&P ADR Index chosen as the benchmark. Since then a second benchmark (Russell Global ex US Index) has also be utilized to monitor the relative performance of the fund.

The management of the three funds --- which includes the weekly AIM equity pitches --- has always been one of the main highlights of the AIM program. The opportunity for students to actively manage domestic and international equity and fixed-income portfolios has been an important part of Marquette AIM program’s experiential learning since its inception.

Given that the program celebrated its 10^th anniversary in 2015 it is fair to ask how the AIM funds have fared. The following table provides key performance metrics for each fund since their inception.

As the table reveals, like many active investment managers, the past decade has been challenging were compared to passive investing. Portfolio managers had to navigate through the Financial Crisis of 2007-2009, the European Debt Crisis of 2011, the collapse of oil prices in 2014-2015, and poor performance from the BRICs and other emerging economies – in addition to the imposition of major new regulatory controls (i.e. Dodd-Frank and Basel III).

The AIM Small Cap Fund has weathered the storm quite well. While the annual average returns are below the Russell 2000 Index, the fund has performed in the top half of all actively managed small cap funds during this period. Despite relatively high transactions costs given the size of the portfolio, the student-managers have generated an overall Sharpe Ratio of .26 – which is slightly below the Index’s .32 measure.

The AIM Fixed Income Fund has performed slightly ahead of its benchmark during the period beginning in January 2006 – with an average annual return of 5.0% versus 4.8% for the Barclay US Aggregate Bond Index. The higher relatively return was generated with slightly more risk – as measured by the standard deviation of monthly returns. The student-managers employ ETFs to implement the strategy and given the embedded costs within ETFs – and the commissions paid – the positive net excess returns is a strong outcome.

Finally, the AIM International Equity Fund has been the most challenging portfolio. The AIM students have to study and analyze non-US securities; a task that this challenging given the different regulatory and accounting conventions used in other countries.  Despite this, the student-managers of the International Fund since inception have matched the S&P ADR Index and slightly underperformed the Russell Global Ex US Index. Again given the relative high transactions costs, the students have posted returns in the top half of all international equity managers during the period. Despite a strong overweight in the emerging market sector – which has performed well below the developed markets – the AIM International Fund has held its own.

In summary, the student-managers of the AIM program portfolios have had a remarkable learning experience and have generated respectable returns. The current and future AIM students look forward to the opportunity to manage a portion of Marquette’s endowment in a professional, prudent manner.    

	Performance of Marquette AIM Funds v. Benchmarks (Since Inception)
	Time Period (9/30/2005 - 12/31/2015)	Annual Return (Geometric Average)	Standard Deviation	Sharpe Ratio
	Marquette AIM Small Cap Equity	6.0%	18.4%	0.26
	Russell 2000 TR USD	7.4%	19.2%	0.32
	Time Period (1/28/2006 - 12/31/2015)	Annual Return (Geometric Average)	Standard Deviation	Sharpe Ratio
	Marquette AIM Fixed Income	5.0%	3.7%	1.00
	Barclays US Agg Bond TR USD	4.8%	3.2%	1.11
	Time Period (9/28/2008 - 12/31/2015)	Annual Return (Geometric Average)	Standard Deviation	Sharpe Ratio
	Marquette AIM Intl Equity	4.3%	20.5%	0.15
	S&P ADR TR USD	4.3%	20.7%	0.15
	Russell Global Ex US TR USD	6.4%	20.2%	0.26

28th AIM Equity Update by Patrick Schulz: Enbridge (ENB): A Recognizable Name in Energy Pipelines

Enbridge Inc. (ENB, $33.45): “Bridging the Gap between Low Commodity Prices and Success”

By: Patrick Schulz, AIM student at Marquette University

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

 Summary

• Enbridge Inc. (NYSE:ENB) transports, generates and distributes energy throughout Canada and the United States operating through five business segments: Liquids Pipelines, Gas Distribution, Gas Pipelines, Processing and Energy Services, Sponsored Investments and Corporate.  

• Low commodity prices have caused Enbridge to struggle for the past few quarters.

• Prime Minister Justin Trudeau is expected to implement stricter environmental protection laws, creating a negative effect on some of Enbridge’s projects.

• The Northern Gateway pipeline project continues to suffer setbacks despite Enbridge’s optimistic outlook in the long-term.

• Management continues to show signs of confidence by raising 2016 guidance and increasing their quarterly dividend.

Key points: Enbridge Inc. continues to struggle in this low commodity price environment, as have almost all crude oil and natural gas transportation and storage stocks.  Enbridge Inc. runs the world’s longest crude oil and liquids transportation system and continues to develop projects to enhance their performance.  Along with these projects, Enbridge Inc. owns Enbridge Energy Partners (NYSE: EEP), Enbridge Energy Management (NYSE: EEQ) and Enbridge Income Fund (ENF).  Although the past 12 months have proven to be difficult for energy stocks, Enbridge Inc. was able to show strong signs of improvement in their 2015 Third Quarter Report.  Their most prominent project, the Northern Gateway pipeline, continues to face setbacks stemming from political decisions throughout Canada.

Prime Minister Justin Trudeau, elected into this position late in 2015, has continued to enforce his environmental changes, hoping to elevate the need for concern in this area.  Trudeau has a history of concern for the environment, including fighting against a proposed $100 million zinc mine, which stems from his master’s degree in Environmental Geography at McGill University.  In late November 2015, Alberta, Canada adopted new climate change policy goals for companies to reduce their methane emissions by 45%, adding costs “in the tens or hundreds of millions of dollars over the next five years”.   

The new Canadian government also recently announced an oil-tanker ban along British Columbia’s north coast, which will cause material damage to Enbridge’s Northern Gateway pipeline project.  These new environmental changes have slowed Enbridge’s growth and may continue to have negative effects in the near future.  With Canada appearing to transform into a more environmentally friendly country, alternative energy resources may play a bigger factor in the Canadian economy, edging out Enbridge’s operations.

If stricter environmental laws aren’t enough, Enbridge’s Northern Gateway pipeline project has faced several difficulties over the past several quarters.  Besides the recent oil-tanker ban along British Columbia’s north coast, the Northern Gateway pipeline project continues to face strong opposition from environmentalists and First Nations, an indigenous tribe in Canada.  To add more difficulties to this project, the B.C. Supreme Court ruled that the British Columbia’s government “failed to properly consult First Nations on Northern Gateway pipeline”.  Although this project will continue on its’ track, there may be more uprisings from First Nations if they continue to disapprove of this pipeline project.

In light of all of these setbacks and headwinds, Enbridge continued their financial success by increasing their quarterly dividend by 14%, to C$0.53/share, making it 21 consecutive annual increases.  In 2015, Enbridge increased their dividend by 33%, following a 5-year average of increases of 14% per year.  Management has suggested further dividend increases, around 14-16% through 2019.

What has the stock done lately?

With oil reaching new 10-year lows and remaining volatile, Enbridge’s stock has seen declines over the past few months.  However, despite all of difficulties with commodity prices and headwinds in Canada, Enbridge’s stock has remained flat over the past month and is starting to show signs of positive momentum.  YTD, Enbridge has turned positive, albeit only 1%, and during this past week when oil ended the week positive, so did Enbridge, returning over 10%.

Past Year Performance: ENB has decreased roughly 33% in value over the past year due to the significant decreases in oil related commodities. With management’s continued dividend increases, Enbridge still shows signs of a positive future.  A small rebound in oil prices will add positive momentum to a struggling energy sector.

1 Year Stock Chart vs. Benchmark from FactSet

Source: FactSet

My Takeaway

Enbridge has shown signs of strength during this difficult commodity price environment by continuing their dividend increases and raising expectations for 2016.  Despite the headwinds they face due to environmental concerns, Enbridge has placed themselves in prime position to reap the benefits of a more stable, and possibly higher, oil price environment.  Look for Enbridge to return more wealth to the shareholders and stock price appreciation throughout 2016.

1 Month Stock Chart from FactSet

Source: FactSet