9 ms·

Show HN: Stock recommender system using hedge fund data and machine learning

134 points by navlio 11y ago

tacos 11y ago
Checking the HN guidelines... hmm. I understand not picking on someone who's just ported Linux to some micro that absolutely doesn't matter. And I understand being gentle with someone who's earnestly re-invented the wheel, badly. But this is such a horrible idea I think it needs to be shot down and shut down. And I'm obviously not talking about anything related to the technology behind the site. If you think for a half second that millions of dollars of Amazon instances aren't doing this, for real, and for better... then you shouldn't be in the market at all.
- alch- 11y ago
  Seriously, did you read the description? It's just an "other people who like x, also like y" system, which I happen to think is pretty awesome. If anyone takes this site as investment advice, well, duh, don't. It isn't, and that's okay.
  - tacos 11y ago
    Seriously, have you ever had any recommendation engine produce useful information? Netflix can't do it for movies, Apple can't do it for Music, Twitter can't do it for information, and LinkedIn can't do for people or companies. Taking this repeatedly-failed concept from consumer nonsense and applying it to financial products is just idiotic. Moreover, it's OLD data. It's annoying enough when I buy a four pack of 9V batteries for my smoke detectors and Amazon tells me that other people bought C cells and Tickle Me Elmo. Gee thanks! But this site is the equivalent of buying a winter jacket and having Amazon tell me that other people are buying swimsuits. Bad site, bad idea -- and as, usual -- pandering, platitude financial advice at the top of a HN comments thread in a thread about real issues that affect real people. Yahoo Finance had "related companies" 15 years ago and it's equally useful. Why does this site even exist? To get karma points? To get bought by some C-list online investment company to help them sell their unethical products? Real hedge funds (and even casual nerd investors) have stuff that makes this look like the child's toy that it is. And every financial site has moved into "managed portfolios" for a reason. Fidelity, Schwab -- even Vanguard. Or you could use this random blue site and hope their Ruby scripts didn't choke scraping the SEC website. Your money, your choice I guess.
    - dharma1 11y ago
      Youtube's recommendation engine is pretty good
      - te 11y ago
        Pandora's is very good
inglor 11y ago
Diclosure: I work at a company https://www.tipranks.com https://www.tipranks.com and we collect all sorts of hedge fund, analyst, blogger and insider data. I don't understand how any of the suggestions it gave me works and that worries me. It's very discomforting when a site tells you what stocks to pick. It's important that sites stay technological and give you information rather than actually promise alpha over the market. I don't think you'd have to be a genius to know that anyone telling you what to buy (rather than give you information you can process yourself) and can actually generate you alpha could just use their money instead of taking yours.
- navlio 11y ago
  Navlio does not use proprietary methods to rate stocks or promise outperformance. Rather it is a navigation tool to make publicly available hedge fund data more accessible. Whether you believe that using this subset of hedge fund data can help you invest better or not is up to you. But at the least it has the potential to give you a sense of what professionals are doing in and around the stocks you are looking at.
  - encoderer 11y ago
    Or rather, what they were doing months ago and reported on in their most recent filing.
  - meeper16 11y ago
    I think http://cymetica.com http://cymetica.com does a great job while using different machine learning techniques.
- semi-extrinsic 11y ago
  This happened with a few companies selling bitcoin mining rigs - they stopped selling rigs and started just mining bitcoins themselves.
  - utunga 11y ago
    By way of contrast I work for a financial company who provide research and recommendations to wall street and whose main 'unique point of difference' is that we don't take positions ourselves. The downside of the idea "you can believe someone who back themselves enough to put their own money in" is that your recommendations are then, of course, not truly independent or unbiased. Most big sell side broker dealers claim there is a chinese wall between their research analysts and their actual trading arm, but sometimes that chinese wall can be suprisingly thin. For example, when a merger is in the early offings, or other large deals about to happen, 'the street' can just go quiet on the subject. Only the (very few) truly independent research firms are still talking at that point. Having previously been close to non-financial journalism it was a bit of a shock to me when I first realised how little truly independent (in the sense of not trading on their own opinion) news or research there was. But, I now understand why that is. The optimum situation is probably to have a mix of approaches.
deleted 11y ago
[deleted]
Everhusk 11y ago
Cool project, have you tried backtesting your algorithm? You will probably get quite a bit of negativity if your plan is to make money off this by recommending stocks as is. I would suggest trying to backtest with quantopian.com to start. If you are able to generate alpha (which it will tell you), you could try entering their monthly contests where they give you $100,000 to play with. Or you could just go talk to investors, up to you.
JesperRavn 11y ago
Before anyone critiques this site, I'd urge them to read the entire front page of their site. In particular: Tell navlio the companies you like and it will apply machine learning to match your views with like minded fund managers and predict what else you might like and dislike. They are not trying to pick stocks for you that they claim have high alpha, just use machine learning to match your "style" with money managers (presumably using data from mandatory reporting by money managers). Is this going to raise the returns of the average site user? Probably not. Does it help people to do invest their money according to their own style or beliefs (wise or otherwise)? Yes, at least according to their claims. Is it a net gain for society or something that deserves attention? In my opinion, no, people should stick to the basics (i.e. index funds).
minimaxir 11y ago
It should be that financial advice is one of the fields where it's really not a good idea to "move fast and break things."
- im3w1l 11y ago
  This seems to just be a search tool. It targets people who already know a little about stocks and funds. Any suggestion would be researched before being adopted, so I don't think a failure would be disastrous.
hardwaresofton 11y ago
For anyone who comes into this thread looking for long-term stock advice: put your money in some ETF (like vanguard) and call it a day. Look at previous rates of return if you're nervous (though past performance can't predict the future), and the return on the overall market over the years (it's ~+7%), and let compound interest do the rest.
- minimaxir 11y ago
  i.e. don't do a startup expecting to become a millionare as a retirement plan. :P
- melling 11y ago
  Where's the fun in that? People have used math to make their fortunes. https://en.m.wikipedia.org/wiki/D._E._Shaw_%26_Co https://en.m.wikipedia.org/wiki/D._E._Shaw_%26_Co. https://en.m.wikipedia.org/wiki/Renaissance_Technologies https://en.m.wikipedia.org/wiki/Renaissance_Technologies Aren't we all reading HN to learn?
  - minimaxir 11y ago
    "Math" is a little bit of an understatement.
    - pvnick 11y ago
      Get some money, download a historical EOD price data set, sprinkle in some math, et voila, riches!
      - melling 11y ago
        No, you need more data than that. You can watch this. Start at 11 minutes. https://www.ted.com/talks/jim_simons_a_rare_interview_with_the_mathematician_who_cracked_wall_street?language=en https://www.ted.com/talks/jim_simons_a_rare_interview_with_t...
  - x5n1 11y ago
paradite 11y ago
On a side note, I think the color scheme is a bit odd and not very comfortable to the eye.
avinassh 11y ago
If I want to start writing such algorithms, where should I start? No, I am gonna test with real money and hope to become to rich. I just want to learn for fun
fru2013 11y ago
Nice work! It would be interesting to write a bot that tracks a portfolio based on the recommendations from this to see how it performs against other strategies.
fuddle 11y ago
Blindly following hedge fund data is a sure fire way too lose money. A lot of these hedge funds are using more complicated strategies such as premium selling and hedging using S&P futures.
navlio 11y ago
http://www.navlio.com/ZKIPL http://www.navlio.com/ZKIPL We ourselves used to track the number of "smart money" investors in biotech stocks like BLUE (bluebird bio) in Excel spreadsheets. The motivation for Navlio was to make this easier and more functional. Using BLUE as an example, the number of "smart money" investors increased from 2 to 10 before its stock price increased over 6x. We used Navlio to find other stocks like BLUE that hedge funds were buying and invested in some of those as well. If you want to actively buy stocks, this is a way to complement your research.
vonnik 11y ago
This is a neat idea, but it has a flaw. The flaw is that Navlio is basing the recommendations on long equity positions (as well as other securities reported in HFs' 13F filings). But hedge funds hedge their bets -- hence the name -- by placing more complicated bets than just buying long, and that includes short sales. You don't have to report short sales in a 13F. https://www.sec.gov/divisions/investment/13ffaq.htm https://www.sec.gov/divisions/investment/13ffaq.htm If you don't know both sides of HFs' bets, you actually have no idea how they feel about a company. They could have a big long position and a bigger short that's not reported. It's central to a hedge fund's business to conceal the kind of bets they are making, and what they plan to do, until the precise moment that it benefits them for the rest of the market to pile in.
- danieltillett 11y ago
  I am not sure why your post is being ignored. Having half the information that is biased in an unknown direction and not randomly selected is worse than having no information. If you have no information at all you will just guess and be right half the time (after accounting for risk/return), while if you have biased information you just get to be on the other side of an informed trade (ie be the sucker).
  - mehrdada 11y ago
    Technically, having biased information can't be worse than having no information (i.e. you can choose to ignore it if you know it is biased and you can try figuring out how and in what direction it is biased). What's worse in this scenario is not the information itself, but incorrectly assuming the information is unbiased.
    - danieltillett 11y ago
      Only if you know the direction it is biased. If you don’t know this then you are just a sucker in someone else game. Imagine a coin tossing game where I know the result of a toss and you don’t, but where I can set the size of the bets. Every time you choose correctly I set the bet low and every time you choose incorrectly I set the bet high. It won’t take me long to completely fleece you despite the odds of you and me being right being 50/50 each time. This is a simple analogy of betting against a hedge fund when you only have access to biased information of their strategy and they know this and can use it to induce you to bet high on a losing bet.
ashwinl 11y ago
I like its ability to list stock symbols based on themes. As a long term investor who invests in specific industries, I have established fundamental and technical criterion I use to evaluate stocks and identify buy/sell times. But, I'm always on the look out for new stocks. Your "Theme" search is a useful feature in this regard.
Thorman 11y ago
How do you rank the list of stocks in the "smart money manager" results? Typically rankings for this type of search are done by percentage of portfolio, but that definitely does not appear to be the case here.
sytelus 11y ago
Looks like ETFs like SPY, GLD, OIL etc doesn't work. The interface could be less jumping from page to page. I would prefer something more simpler and straight forward: -Enter few symbols (including ETFs), for which you are interested -show actual data you have for them (like who bough & sold) -Show your ML predictions -Show related stocks/ETF to balance out portfolio

134 points by navlio 11y ago

tacos 11y ago

Checking the HN guidelines... hmm. I understand not picking on someone who's just ported Linux to some micro that absolutely doesn't matter. And I understand being gentle with someone who's earnestly re-invented the wheel, badly. But this is such a horrible idea I think it needs to be shot down and shut down. And I'm obviously not talking about anything related to the technology behind the site. If you think for a half second that millions of dollars of Amazon instances aren't doing this, for real, and for better... then you shouldn't be in the market at all.

alch- 11y ago
Seriously, did you read the description? It's just an "other people who like x, also like y" system, which I happen to think is pretty awesome. If anyone takes this site as investment advice, well, duh, don't. It isn't, and that's okay.
- tacos 11y ago
  Seriously, have you ever had any recommendation engine produce useful information? Netflix can't do it for movies, Apple can't do it for Music, Twitter can't do it for information, and LinkedIn can't do for people or companies. Taking this repeatedly-failed concept from consumer nonsense and applying it to financial products is just idiotic. Moreover, it's OLD data. It's annoying enough when I buy a four pack of 9V batteries for my smoke detectors and Amazon tells me that other people bought C cells and Tickle Me Elmo. Gee thanks! But this site is the equivalent of buying a winter jacket and having Amazon tell me that other people are buying swimsuits. Bad site, bad idea -- and as, usual -- pandering, platitude financial advice at the top of a HN comments thread in a thread about real issues that affect real people. Yahoo Finance had "related companies" 15 years ago and it's equally useful. Why does this site even exist? To get karma points? To get bought by some C-list online investment company to help them sell their unethical products? Real hedge funds (and even casual nerd investors) have stuff that makes this look like the child's toy that it is. And every financial site has moved into "managed portfolios" for a reason. Fidelity, Schwab -- even Vanguard. Or you could use this random blue site and hope their Ruby scripts didn't choke scraping the SEC website. Your money, your choice I guess.
  - dharma1 11y ago
    Youtube's recommendation engine is pretty good
    - te 11y ago
      Pandora's is very good

inglor 11y ago

Diclosure: I work at a company https://www.tipranks.com https://www.tipranks.com and we collect all sorts of hedge fund, analyst, blogger and insider data. I don't understand how any of the suggestions it gave me works and that worries me. It's very discomforting when a site tells you what stocks to pick. It's important that sites stay technological and give you information rather than actually promise alpha over the market. I don't think you'd have to be a genius to know that anyone telling you what to buy (rather than give you information you can process yourself) and can actually generate you alpha could just use their money instead of taking yours.

navlio 11y ago
Navlio does not use proprietary methods to rate stocks or promise outperformance. Rather it is a navigation tool to make publicly available hedge fund data more accessible. Whether you believe that using this subset of hedge fund data can help you invest better or not is up to you. But at the least it has the potential to give you a sense of what professionals are doing in and around the stocks you are looking at.
- encoderer 11y ago
  Or rather, what they were doing months ago and reported on in their most recent filing.
- meeper16 11y ago
  I think http://cymetica.com http://cymetica.com does a great job while using different machine learning techniques.
semi-extrinsic 11y ago
This happened with a few companies selling bitcoin mining rigs - they stopped selling rigs and started just mining bitcoins themselves.
- utunga 11y ago
  By way of contrast I work for a financial company who provide research and recommendations to wall street and whose main 'unique point of difference' is that we don't take positions ourselves. The downside of the idea "you can believe someone who back themselves enough to put their own money in" is that your recommendations are then, of course, not truly independent or unbiased. Most big sell side broker dealers claim there is a chinese wall between their research analysts and their actual trading arm, but sometimes that chinese wall can be suprisingly thin. For example, when a merger is in the early offings, or other large deals about to happen, 'the street' can just go quiet on the subject. Only the (very few) truly independent research firms are still talking at that point. Having previously been close to non-financial journalism it was a bit of a shock to me when I first realised how little truly independent (in the sense of not trading on their own opinion) news or research there was. But, I now understand why that is. The optimum situation is probably to have a mix of approaches.

deleted 11y ago

[deleted]

Everhusk 11y ago

Cool project, have you tried backtesting your algorithm? You will probably get quite a bit of negativity if your plan is to make money off this by recommending stocks as is. I would suggest trying to backtest with quantopian.com to start. If you are able to generate alpha (which it will tell you), you could try entering their monthly contests where they give you $100,000 to play with. Or you could just go talk to investors, up to you.

JesperRavn 11y ago

Before anyone critiques this site, I'd urge them to read the entire front page of their site. In particular: Tell navlio the companies you like and it will apply machine learning to match your views with like minded fund managers and predict what else you might like and dislike. They are not trying to pick stocks for you that they claim have high alpha, just use machine learning to match your "style" with money managers (presumably using data from mandatory reporting by money managers). Is this going to raise the returns of the average site user? Probably not. Does it help people to do invest their money according to their own style or beliefs (wise or otherwise)? Yes, at least according to their claims. Is it a net gain for society or something that deserves attention? In my opinion, no, people should stick to the basics (i.e. index funds).

minimaxir 11y ago

It should be that financial advice is one of the fields where it's really not a good idea to "move fast and break things."

im3w1l 11y ago
This seems to just be a search tool. It targets people who already know a little about stocks and funds. Any suggestion would be researched before being adopted, so I don't think a failure would be disastrous.

hardwaresofton 11y ago

For anyone who comes into this thread looking for long-term stock advice: put your money in some ETF (like vanguard) and call it a day. Look at previous rates of return if you're nervous (though past performance can't predict the future), and the return on the overall market over the years (it's ~+7%), and let compound interest do the rest.

minimaxir 11y ago
i.e. don't do a startup expecting to become a millionare as a retirement plan. :P
melling 11y ago
Where's the fun in that? People have used math to make their fortunes. https://en.m.wikipedia.org/wiki/D._E._Shaw_%26_Co https://en.m.wikipedia.org/wiki/D._E._Shaw_%26_Co. https://en.m.wikipedia.org/wiki/Renaissance_Technologies https://en.m.wikipedia.org/wiki/Renaissance_Technologies Aren't we all reading HN to learn?
- minimaxir 11y ago
  "Math" is a little bit of an understatement.
  - pvnick 11y ago
    Get some money, download a historical EOD price data set, sprinkle in some math, et voila, riches!
    - melling 11y ago
      No, you need more data than that. You can watch this. Start at 11 minutes. https://www.ted.com/talks/jim_simons_a_rare_interview_with_the_mathematician_who_cracked_wall_street?language=en https://www.ted.com/talks/jim_simons_a_rare_interview_with_t...
- x5n1 11y ago

paradite 11y ago

On a side note, I think the color scheme is a bit odd and not very comfortable to the eye.

avinassh 11y ago

If I want to start writing such algorithms, where should I start? No, I am gonna test with real money and hope to become to rich. I just want to learn for fun

fru2013 11y ago

Nice work! It would be interesting to write a bot that tracks a portfolio based on the recommendations from this to see how it performs against other strategies.

fuddle 11y ago

Blindly following hedge fund data is a sure fire way too lose money. A lot of these hedge funds are using more complicated strategies such as premium selling and hedging using S&P futures.

navlio 11y ago

http://www.navlio.com/ZKIPL http://www.navlio.com/ZKIPL We ourselves used to track the number of "smart money" investors in biotech stocks like BLUE (bluebird bio) in Excel spreadsheets. The motivation for Navlio was to make this easier and more functional. Using BLUE as an example, the number of "smart money" investors increased from 2 to 10 before its stock price increased over 6x. We used Navlio to find other stocks like BLUE that hedge funds were buying and invested in some of those as well. If you want to actively buy stocks, this is a way to complement your research.

vonnik 11y ago

This is a neat idea, but it has a flaw. The flaw is that Navlio is basing the recommendations on long equity positions (as well as other securities reported in HFs' 13F filings). But hedge funds hedge their bets -- hence the name -- by placing more complicated bets than just buying long, and that includes short sales. You don't have to report short sales in a 13F. https://www.sec.gov/divisions/investment/13ffaq.htm https://www.sec.gov/divisions/investment/13ffaq.htm If you don't know both sides of HFs' bets, you actually have no idea how they feel about a company. They could have a big long position and a bigger short that's not reported. It's central to a hedge fund's business to conceal the kind of bets they are making, and what they plan to do, until the precise moment that it benefits them for the rest of the market to pile in.

danieltillett 11y ago
I am not sure why your post is being ignored. Having half the information that is biased in an unknown direction and not randomly selected is worse than having no information. If you have no information at all you will just guess and be right half the time (after accounting for risk/return), while if you have biased information you just get to be on the other side of an informed trade (ie be the sucker).
- mehrdada 11y ago
  Technically, having biased information can't be worse than having no information (i.e. you can choose to ignore it if you know it is biased and you can try figuring out how and in what direction it is biased). What's worse in this scenario is not the information itself, but incorrectly assuming the information is unbiased.
  - danieltillett 11y ago
    Only if you know the direction it is biased. If you don’t know this then you are just a sucker in someone else game. Imagine a coin tossing game where I know the result of a toss and you don’t, but where I can set the size of the bets. Every time you choose correctly I set the bet low and every time you choose incorrectly I set the bet high. It won’t take me long to completely fleece you despite the odds of you and me being right being 50/50 each time. This is a simple analogy of betting against a hedge fund when you only have access to biased information of their strategy and they know this and can use it to induce you to bet high on a losing bet.

ashwinl 11y ago

I like its ability to list stock symbols based on themes. As a long term investor who invests in specific industries, I have established fundamental and technical criterion I use to evaluate stocks and identify buy/sell times. But, I'm always on the look out for new stocks. Your "Theme" search is a useful feature in this regard.

Thorman 11y ago

How do you rank the list of stocks in the "smart money manager" results? Typically rankings for this type of search are done by percentage of portfolio, but that definitely does not appear to be the case here.

sytelus 11y ago

Looks like ETFs like SPY, GLD, OIL etc doesn't work. The interface could be less jumping from page to page. I would prefer something more simpler and straight forward: -Enter few symbols (including ETFs), for which you are interested -show actual data you have for them (like who bough & sold) -Show your ML predictions -Show related stocks/ETF to balance out portfolio