Google Trends is a service that lets user’s access statistics on how often a term is searched through Google’s search engine. With the Company dominating the search market, this data is a good proxy for how often a term or a company is queried. Users can compare single terms or compare multiple terms with each other. For example, users can see that the term “Boston Red Sox” is searched six times more than the term “Kansas City Royals.” Here is a quick tutorial on how the inner calculations work. Click here.
How can the service help investors? Under Armour (NYSE: UA) the maker of performance apparel has been on my radar. One of the facets of the business I was trying to research was when consumers thought most about buying UA’s products. It’s logical to think that a retailer would realize the majority of their sales during the holiday period but I hypothesized that UA’s products are used throughout the year by athletes instead of holiday gifts. Therefore their sales might be more level throughout the year. The UA trends chart however shows that they continue to be more similar to a holiday retailer as the company experiences spikes in consumers interacting with the brand at the end of every year since 2004.
Maybe my sports apparel assumption was incorrect. Let’s compare the trends to that of UA’s main competitor Nike (NYSE:NKE)
As the chart above shows, Nike does not show nearly the volatility in the later months of the year like UA does demonstrating that Nike’s products are potentially purchased more steadily throughout the year. This information is useful for Under Armour investors as it demonstrates the importance of the holiday season for the Company. Any indication of a decline in overall holiday sales could have greater effect on UA compared to others. Speaking of Nike, Google Trends can also let you compare between two terms to determine their search ranking to each other. Nike is obviously the larger corporation so more searches on Google is a given, but how much in comparison to UA? According to Google, apparently 32 times as much:
Under Armour has a lot of work to do to catch up to the brand scale of Nike. International Data The service is also helpful in determining how a company is doing overseas compared to their US operations. As more company’s look overseas for growth this could be very important to investors. Take McDonald’s (NYSE: MCD) for example. The company’s searches have seen an upward trend recently, but mostly are flat since 2004. But look at McDonald’s queries in Singapore (below). Evidence of increased brand penetration can only help MCD investors. Further data Listed below are a few additional ways Google Trends can help investors gain insight: How well has a new product done in the market? Is it gaining traction?
Is the company’s marketing efforts producing further queries on the brand?
How often negative publicity of the company is still researched (e.g. Exxon Valdez)? Limitations As with anything, there are inherent limitations in using Trends to make investment decisions. For starters, the data is just a subset of Google’s total searches. Where probabilities say that the sample Google takes is a good indicator, it leads to the potential for overstatement. Terms could also be searched less as people become more aware of them. Investors should leverage but not rely completely on the information presented. My use of this service continues to evolve as I think of more ways to use it. Email me if you come up with any that are unique – firstname.lastname@example.org Enjoy!