5 ms·

Perplexity AI's new tool for researching the stock market

74 points by CrankyBear 2y ago

airstrike 2y ago
Speaking as a former M&A financial advisor and valuation nerd, historical financial data is very close to worthless for any valuation work, except perhaps for vaguely connecting the dots to your proprietary, forward looking financial model which is based on a deep understanding of a particular company and industry. This reads to me like garbage in, garbage out... just like 99.9999% of current resources on financial data. There's definitely an opportunity to disrupt this backwards "financial data" industry, but it's not going to be done by slapping LLMs and RAGs onto stale data in 10-Qs and 10-Ks.
- serjester 2y ago
  I don't touch finance, but I'd be curious to have you elaborate on the data sources that a professional does care about.
  - infecto 2y ago
    They care about anything that helps give insight into the future. Its still obtainable data but that is where the edge comes from, taking unique data and applying your way of thinking (models) to it. This could be anything and everything that relates to the company/industry you are looking at. You take lots of different bits of information and distill it into a model. If you are in the automotive space, maybe you care how US policy is looking for China. To put it differently, historical financials, K/Qs are all data points that have been commoditized and you can pull it instantly.
  - airstrike 2y ago
    It depends on whether you're publicly sharing your valuation work or confidentially advising a client about valuation. The former is what equity research analysts do at major investment banks (like Morgan Stanley, BAML, JP Morgan, etc.) and boutique / middle-market research firms (Stifel, Cantor Fitzgerald, Raymond James, Guggenheim, etc.). Google has led me to this LinkedIn post with a long list of equity research firms which seems accurate and credible after skimming it briefly: https://www.linkedin.com/pulse/most-comprehensive-list-sell-side-equity-research-firms-richard-toad-0hllc/ https://www.linkedin.com/pulse/most-comprehensive-list-sell-... The latter is what I used to do as an M&A advisor. Basically the "I want to buy company X, how much should I pay?" or "I may be interested in selling / people are reaching out expressing interest in my company, how much am I worth?" type of scenarios, plus some other more complex but not necessarily more fun things like merger of equals and what have you. In these situations, the analysis tends to be more of a "let's look at it from all angles" which usually gets distilled into a one-page summary nicknamed "football field" showing ranges of values according to various methodologies. Things like DCF, discounted equity value, relative trading multiples (also called "comps"), LBO (also called the "floor valuation") all get featured and are the standard metrics on which an advisor's view is supported. As an advisor, I never came up with my own projections for valuation, because that would open the door for litigation so it's just not done. Instead, we point to what "the street" is saying, by taking the consensus view (often some filtered average/mean of equity research projections usually provided by Bloomberg, FactSet or Capital IQ for liability reasons, but which may be "handspread" in some situations by actually pulling the specific numbers from the latest available research reports from several analysts and calculating the mean). I hope that helps answer your question but happy to answer any follow-ups too since I'm always glad to share what I know about the topic
    - serjester 2y ago
      That’s super helpful - so basically what other deals are going on in the market and how they’re being structured? Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform.
      - airstrike 2y ago
        > That’s super helpful - so basically what other deals are going on in the market and how they’re being structured? That's one of the rows of the football field. Actually one I forgot to mention, often called "precedent transactions". You can see some examples of these slides if you scroll down to "Why these slides are made" here https://www.alexanderjarvis.com/investment-banking-slide-examples-of-football-field/ https://www.alexanderjarvis.com/investment-banking-slide-exa... But when I mentioned relative valuation or trading comparables, I meant looking at similar public companies today and what their implied valuation is based on their current share price (more about that here https://news.ycombinator.com/item?id=41862295 https://news.ycombinator.com/item?id=41862295) Those relative valuation methodologies are different so-called "intrinsic" valuation methodologies like DCF or discounted equity value, which just look at the company you're valuing and do some math "in a vacuum" to get some implied value per share. > Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform. I agree, but there's definitely a lot of room for automation in the professional space. Unfortunately I can only tackle one startup at a time so that's like ~third on my list of revolutionary ideas that I'll get to one day ;-)
  - tim333 2y ago
    Warren Buffett is famous for reading the annual reports, basically all of them and starting from the back where you tend to get the embarrassing stuff in small print. He also reads mainstream press - wsj, ft etc.
- infecto 2y ago
  I am always surprised companies create these distractions in their product. Agree on all your points. Little to no value in this tool based on the data they listed. All of these things already exist and for anyone doing work of any value, you would already have these datasets at your fingertips.
- coffeeandhn 2y ago
  Is there a "backwards" financial data service you'd recommend instead? I've been researching a bit and everything I could find was basically APIs that charged you by the number of API request calls to extract the dataset bit by bit. First the tickers, then the aggregates... and so on.
  - airstrike 2y ago
    - $$$$ Bloomberg - $$$ FactSet - $$ Capital IQ Depends on how much money you have and what your needs are but that's basically it
- deleted 2y ago
  [deleted]
- sirsinsalot 2y ago
  That's a lot of "this won't work" without very much "here's what does work" leading me to conclude this is bluster and ego. I always hear these finance people dick waving about how crap everyone else's methodologies are without examples of their own. This leads me to conclude it's all snake oil anyway. So I'm asking, speaking as a former M&A financial advisor... What _does_ work?
  - immibis 2y ago
    nothing. There is no way to predict the stock market. Even the way you're probably thinking of. Even the ones in the replies to this comment. Even the really basic ones and the really advanced ones.
    - altdataseller 2y ago
      This. If something "worked", then nobody would share it, or it's so popular that everyone has everyone applied it, and it doesn't work anymore.
    - jdhwosnhw 2y ago
      The existence and success of the Millenium fund is a (probabilistic, to be fair) disproof of your assertion.
      - FridgeSeal 2y ago
        Tbf, I’ve had friends in finance describe the Millennium fund (now Medallion fund I think?) as operating in a very, very specific niche of the market. Probably helps that it’s limited to a very select group. Its extraordinary impressive for sure, but I don’t think it is widely applicable or comparable.
      - immibis 2y ago
        Outlying returns can be produced by pure chance, or also by cheating.
  - yifanl 2y ago
- drexlspivey 2y ago
  Historical financial data is used for calculating correlations between assets, historical volatility, stress testing, VaR etc. All very useful if you follow any sort of risk management when constructing a portfolio.
  - airstrike 2y ago
    That's pretty much just stock prices, not 10-Qs and 10-Ks. And it's already available elsewhere. For those use cases, you need databases and data sources, not LLMs and RAGs.
- eclipsetheworld 2y ago
  While I agree with your statement and recognize that, for now, Perplexity has only introduced a financial information platform comparable to Google Finance or Yahoo Finance, the true value of any forward-looking financial model is rooted in the depth of the qualitative research supporting it. Building a useful forward looking financial model mostly involves qualitative analysis. This means thoroughly examining the company's and competitors' 10-Ks and 10-Qs, digesting industry reports, understanding the company’s business model, breaking down the underlying mechanics of the income statement, balance sheet, and cash flow statement, identifying the core processes driving value creation, forming solid hypotheses on how the business will evolve, etc. I believe Perplexity, as an advanced answering engine, provides a strong foundation for supporting this kind of in-depth research and hope to see the platform evolve into this direction.
baxtr 2y ago
Don’t expect miracles. >At this stage of the game, though, Perplexity Finance needs much more refining before I can call it a real competitor to the existing stock analysis programs, such as Stock Rover, WallStreetZen, and TradingView.
timhigins 2y ago
This reads like a sponsored/promoted article. Would be nice to see a disclosure if it is or they get affiliate link revenue
- fullshark 2y ago
  It’s probably the traditional way a glowing article gets written: a reporter repeats something that a PR rep sent to their inbox cause they needed something written to hit a deadline.
  - sebastiennight 2y ago
    This is why good books on PR will always tell you to write your press release like an article, so that a lazy journalist can post it verbatim. (Have gotten this result a couple times from press releases I wrote when I was running my previous company!)
- kid64 2y ago
  Typical payola rubbish that dominates Ars Technica, Forbes, and too many other once-legit publications.
burkaman 2y ago
Am I missing something, or is this just a normal stock browser like Yahoo Finance? I don't see anything remotely new in the article or the site (https://www.perplexity.ai/finance/NVDA https://www.perplexity.ai/finance/NVDA) and it doesn't seem to have anything to do with AI. It's a nice-looking feature but I don't think it's newsworthy.
- linsomniac 2y ago
  The benefit is that it gives you some suggested topics of investigation, including references to where it found that information. For example, I looked at one stock I'm interested in and it suggested there was a potential short squeeze in the making, and the references pointed out that that was 7 months ago. So it was summarizing it thinking that was a current state. It also suggested summaries about how changes in classification of the business might impact the stock price. I'll probably use this in some of my investigations, but definitely need to look at the citations.
m3kw9 2y ago
This is the perplexity’s take on the roulette historical roll display.
linsomniac 2y ago
Somewhat related: Last night I fed 3 companies proxy statements to Notebook LM and had it generate a "podcast" on them. One of which was a 100 page document, which I read the bulk of, and the podcast was pretty good, though it did misrepresent one 2023 statement as being a current statement. Definitely a tool I'm going to be using more.
rvz 2y ago
Do not fall for this snake-oil scam garbage from Perplexity. You are better off with TradingView.
whiplash451 2y ago
If the world needed any evidence that perplexity is desperate, this is it.
kkfx 2y ago
It would be much more interesting (and challenging) a platform to automatic trend recognition through news, while it could only be valid if personal, due to obvious bias any owner can introduce...

74 points by CrankyBear 2y ago

Speaking as a former M&A financial advisor and valuation nerd, historical financial data is very close to worthless for any valuation work, except perhaps for vaguely connecting the dots to your proprietary, forward looking financial model which is based on a deep understanding of a particular company and industry. This reads to me like garbage in, garbage out... just like 99.9999% of current resources on financial data. There's definitely an opportunity to disrupt this backwards "financial data" industry, but it's not going to be done by slapping LLMs and RAGs onto stale data in 10-Qs and 10-Ks.

serjester 2y ago
I don't touch finance, but I'd be curious to have you elaborate on the data sources that a professional does care about.
- infecto 2y ago
  They care about anything that helps give insight into the future. Its still obtainable data but that is where the edge comes from, taking unique data and applying your way of thinking (models) to it. This could be anything and everything that relates to the company/industry you are looking at. You take lots of different bits of information and distill it into a model. If you are in the automotive space, maybe you care how US policy is looking for China. To put it differently, historical financials, K/Qs are all data points that have been commoditized and you can pull it instantly.
- airstrike 2y ago
  It depends on whether you're publicly sharing your valuation work or confidentially advising a client about valuation. The former is what equity research analysts do at major investment banks (like Morgan Stanley, BAML, JP Morgan, etc.) and boutique / middle-market research firms (Stifel, Cantor Fitzgerald, Raymond James, Guggenheim, etc.). Google has led me to this LinkedIn post with a long list of equity research firms which seems accurate and credible after skimming it briefly: https://www.linkedin.com/pulse/most-comprehensive-list-sell-side-equity-research-firms-richard-toad-0hllc/ https://www.linkedin.com/pulse/most-comprehensive-list-sell-... The latter is what I used to do as an M&A advisor. Basically the "I want to buy company X, how much should I pay?" or "I may be interested in selling / people are reaching out expressing interest in my company, how much am I worth?" type of scenarios, plus some other more complex but not necessarily more fun things like merger of equals and what have you. In these situations, the analysis tends to be more of a "let's look at it from all angles" which usually gets distilled into a one-page summary nicknamed "football field" showing ranges of values according to various methodologies. Things like DCF, discounted equity value, relative trading multiples (also called "comps"), LBO (also called the "floor valuation") all get featured and are the standard metrics on which an advisor's view is supported. As an advisor, I never came up with my own projections for valuation, because that would open the door for litigation so it's just not done. Instead, we point to what "the street" is saying, by taking the consensus view (often some filtered average/mean of equity research projections usually provided by Bloomberg, FactSet or Capital IQ for liability reasons, but which may be "handspread" in some situations by actually pulling the specific numbers from the latest available research reports from several analysts and calculating the mean). I hope that helps answer your question but happy to answer any follow-ups too since I'm always glad to share what I know about the topic
  - serjester 2y ago
    That’s super helpful - so basically what other deals are going on in the market and how they’re being structured? Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform.
    - airstrike 2y ago
      > That’s super helpful - so basically what other deals are going on in the market and how they’re being structured? That's one of the rows of the football field. Actually one I forgot to mention, often called "precedent transactions". You can see some examples of these slides if you scroll down to "Why these slides are made" here https://www.alexanderjarvis.com/investment-banking-slide-examples-of-football-field/ https://www.alexanderjarvis.com/investment-banking-slide-exa... But when I mentioned relative valuation or trading comparables, I meant looking at similar public companies today and what their implied valuation is based on their current share price (more about that here https://news.ycombinator.com/item?id=41862295 https://news.ycombinator.com/item?id=41862295) Those relative valuation methodologies are different so-called "intrinsic" valuation methodologies like DCF or discounted equity value, which just look at the company you're valuing and do some math "in a vacuum" to get some implied value per share. > Which makes sense - seems like Perplexity will always cater towards your average retail investor, there’s just too much complexity and cost to acquiring the type of data a professional cares about. Seems like that will need a to be its own platform. I agree, but there's definitely a lot of room for automation in the professional space. Unfortunately I can only tackle one startup at a time so that's like ~third on my list of revolutionary ideas that I'll get to one day ;-)
- tim333 2y ago
  Warren Buffett is famous for reading the annual reports, basically all of them and starting from the back where you tend to get the embarrassing stuff in small print. He also reads mainstream press - wsj, ft etc.
infecto 2y ago
I am always surprised companies create these distractions in their product. Agree on all your points. Little to no value in this tool based on the data they listed. All of these things already exist and for anyone doing work of any value, you would already have these datasets at your fingertips.
coffeeandhn 2y ago
Is there a "backwards" financial data service you'd recommend instead? I've been researching a bit and everything I could find was basically APIs that charged you by the number of API request calls to extract the dataset bit by bit. First the tickers, then the aggregates... and so on.
- airstrike 2y ago
  - $$$$ Bloomberg - $$$ FactSet - $$ Capital IQ Depends on how much money you have and what your needs are but that's basically it
deleted 2y ago
[deleted]
sirsinsalot 2y ago
That's a lot of "this won't work" without very much "here's what does work" leading me to conclude this is bluster and ego. I always hear these finance people dick waving about how crap everyone else's methodologies are without examples of their own. This leads me to conclude it's all snake oil anyway. So I'm asking, speaking as a former M&A financial advisor... What _does_ work?
- immibis 2y ago
  nothing. There is no way to predict the stock market. Even the way you're probably thinking of. Even the ones in the replies to this comment. Even the really basic ones and the really advanced ones.
  - altdataseller 2y ago
    This. If something "worked", then nobody would share it, or it's so popular that everyone has everyone applied it, and it doesn't work anymore.
  - jdhwosnhw 2y ago
    The existence and success of the Millenium fund is a (probabilistic, to be fair) disproof of your assertion.
    - FridgeSeal 2y ago
      Tbf, I’ve had friends in finance describe the Millennium fund (now Medallion fund I think?) as operating in a very, very specific niche of the market. Probably helps that it’s limited to a very select group. Its extraordinary impressive for sure, but I don’t think it is widely applicable or comparable.
    - immibis 2y ago
      Outlying returns can be produced by pure chance, or also by cheating.
- yifanl 2y ago
drexlspivey 2y ago
Historical financial data is used for calculating correlations between assets, historical volatility, stress testing, VaR etc. All very useful if you follow any sort of risk management when constructing a portfolio.
- airstrike 2y ago
  That's pretty much just stock prices, not 10-Qs and 10-Ks. And it's already available elsewhere. For those use cases, you need databases and data sources, not LLMs and RAGs.
eclipsetheworld 2y ago
While I agree with your statement and recognize that, for now, Perplexity has only introduced a financial information platform comparable to Google Finance or Yahoo Finance, the true value of any forward-looking financial model is rooted in the depth of the qualitative research supporting it. Building a useful forward looking financial model mostly involves qualitative analysis. This means thoroughly examining the company's and competitors' 10-Ks and 10-Qs, digesting industry reports, understanding the company’s business model, breaking down the underlying mechanics of the income statement, balance sheet, and cash flow statement, identifying the core processes driving value creation, forming solid hypotheses on how the business will evolve, etc. I believe Perplexity, as an advanced answering engine, provides a strong foundation for supporting this kind of in-depth research and hope to see the platform evolve into this direction.

baxtr 2y ago

Don’t expect miracles. >At this stage of the game, though, Perplexity Finance needs much more refining before I can call it a real competitor to the existing stock analysis programs, such as Stock Rover, WallStreetZen, and TradingView.

timhigins 2y ago

This reads like a sponsored/promoted article. Would be nice to see a disclosure if it is or they get affiliate link revenue

fullshark 2y ago
It’s probably the traditional way a glowing article gets written: a reporter repeats something that a PR rep sent to their inbox cause they needed something written to hit a deadline.
- sebastiennight 2y ago
  This is why good books on PR will always tell you to write your press release like an article, so that a lazy journalist can post it verbatim. (Have gotten this result a couple times from press releases I wrote when I was running my previous company!)
kid64 2y ago
Typical payola rubbish that dominates Ars Technica, Forbes, and too many other once-legit publications.

burkaman 2y ago

Am I missing something, or is this just a normal stock browser like Yahoo Finance? I don't see anything remotely new in the article or the site (https://www.perplexity.ai/finance/NVDA https://www.perplexity.ai/finance/NVDA) and it doesn't seem to have anything to do with AI. It's a nice-looking feature but I don't think it's newsworthy.

linsomniac 2y ago
The benefit is that it gives you some suggested topics of investigation, including references to where it found that information. For example, I looked at one stock I'm interested in and it suggested there was a potential short squeeze in the making, and the references pointed out that that was 7 months ago. So it was summarizing it thinking that was a current state. It also suggested summaries about how changes in classification of the business might impact the stock price. I'll probably use this in some of my investigations, but definitely need to look at the citations.

m3kw9 2y ago

This is the perplexity’s take on the roulette historical roll display.

linsomniac 2y ago

Somewhat related: Last night I fed 3 companies proxy statements to Notebook LM and had it generate a "podcast" on them. One of which was a 100 page document, which I read the bulk of, and the podcast was pretty good, though it did misrepresent one 2023 statement as being a current statement. Definitely a tool I'm going to be using more.

rvz 2y ago

Do not fall for this snake-oil scam garbage from Perplexity. You are better off with TradingView.

whiplash451 2y ago

If the world needed any evidence that perplexity is desperate, this is it.

kkfx 2y ago

It would be much more interesting (and challenging) a platform to automatic trend recognition through news, while it could only be valid if personal, due to obvious bias any owner can introduce...