The month of November ended last Monday. As many people analyze the performance of securities for the month, I’d like to look at sentiment and change in sentiment for the technology sector.
Sentiment is a measure of how people feel a security will perform and is captured by a voting mechanism that indicates a strong buy, buy, neutral, sell, and strong sell. The value of sentiment is based on the ‘Wisdom of Crowds’ where the many will in most cases make better decisions than the individual. Higher sentiment securities are considered higher quality, while lower sentiment securities are considered lower quality.
Voting Mechanism for Capturing Sentiment
While overall sentiment is effective in defining the quality of a stock, change in sentiment provides a timing mechanism to understand underlying changes in a security potentially ahead of a price move. For example, a large increase in sentiment should be seen as positive even if the underlying stock has a low absolute sentiment, while a large decrease in sentiment should be seen as negative even if the underlying security has a high absolute sentiment.
For this analysis, we will use sentiment generated by the web application, Piqqem. Piqqem captures, processes, and displays sentiment results by allowing its users to vote on the price direction of a stock and then applies its own propriety factors to calculate sentiment for a security. In their model, a scale of -100 to 100 is used with -100 representing the lowest level of sentiment and 100 representing the highest level of sentiment.
November Sentiment for Technology
The above chart shows Apple’s (NASDAQ:AAPL) current sentiment leading the group as of 11/30/09 at a stellar 59 with Microsoft’s (NASDAQ:MSFT) sentiment at 15 and bringing up the rear. Google (NASDAQ:GOOG), Intel (NASDAQ:INTC), Cisco (NASDAQ:CSCO), Amazon (NASDAQ:AMZN) and HP (NYSE:HPQ) all came in with respectable sentiment results above 30. But how did sentiment change for this group?
November Change in Sentiment – HP, Amazon, Google are the Winners
The change in November sentiment for these seven securities shows a strong upward bias for HP, Amazon, and Google, a moderate upward bias for Apple and Microsoft, a neutral bias for Cisco and a downward bias for Intel. The sentiment move for HP was tied to exceeding earnings expectations with sentiment moving ahead of their earnings release, while Amazon, Google, and Apple benefitted from the continuation of a strong technology run in the market. Microsoft began to see some benefit from the release of Windows 7. Changes in sentiment can be an early warning system for the underlying security.
Sentiment for this technology group gained on average 2.5% in sentiment for November.
Disclosure: No Positions