A couple of months ago I wrote a bullish article about Roundy's supermarkets (NYSE:RNDY). For some reason I can't explain, my thoughts about a small cap, regional grocery store chain hit a nerve and quickly became my most viewed article. So how well did the actual stock do?
The stock fell 38%, and the company cut their dividend.
Ouch. Hey. Sorry about that.
But my purpose today is not to dwell on Roundy's. I do not intend to revise or update my stance on that company at this time. The purpose of this instablog is to present a hypothesis that could potentially help me, my readers, and other contributors improve our returns moving forward.
Based on my own results, high page views appear to be correlated with poor short term performance of the article's thesis.
Here's The Data
I have written seven articles that included a single, stock-specific investment thesis. This table summarizes my positions, the number of page views they received, and the resulting two month return.
Here are the results graphically:
The Y-axis of the graph is set to 5,000 page views because that is approximately the site average.
Perhaps a Venn diagram says it best.
Seven data points are not enough to draw a solid conclusion, but it's definitely a trend. And I suspect it will continue. It's a Murphy's law sort of thing. Stupidity simply attracts attention; a lot of things about the stock market and high school suddenly make more sense.
How Significant Is This Trend, Scientifically
Since I don't have a whole bunch of data to work with, I want to make sure this apparent trend isn't just noise. I ran a simple t-test on the data by dividing my articles into two groups; those with more than 4,000 page views and those with less than 4,000 page views.
Here is the breakdown:
|Under 4,000 PV||Over 4,000 PV|
|Number of Articles||5||2|
The t value is 1.976, and the corresponding two-tailed p-value is 0.1051. This means there is 10.51% chance the results are simply due to chance. The standard level of significance is a p-value of 0.05. I do not yet have enough data to say that it is statistically significant.
But this isn't a doctoral dissertation, it's an investing article. I will continue to monitor this trend, of course, but every data point takes two months. In the meantime, I suspect most investors would like to be aware of a trend even if there is only a 90% chance it is real.
Why Page Views Might Hurt Performance
For most articles on Seeking Alpha, page views are driven by pre-existing interest in the stock. You see the headline on Yahoo! Finance or you get an email alert and they click through to read it. High page views mean that a lot of people are looking at that particular stock at the moment. If everyone has the same idea, at the same time, then the trade is crowded and the price is driven up.
But what about contrarian articles? A crowded trade isn't a problem if the author is on the opposite side of the crowd. The negative performance correlation should be stronger for articles advocating a simple, long position, which is exactly what I found. The r squared value of the fitted trendline rose from 0.31 to 0.74 when only long positions were included.
However, I wouldn't rule out the negative correlation for short and options articles. When a large number of people are watching a stock then a lot of information is already baked in to the stock price. My insights, positive or negative, are less valuable.
I don't think I'm moving the market. None of the articles had any apparent impact on price action the day they were published. The negative correlation is similar whether you measure performance from the day the articles were published or the day before. This suggests that my genuinely bad ideas are just plain more likely to attract attention than my genuinely good ideas.
How Can We Use This?
The reason that this could be a useful indicator is that it is not always apparent which stocks are being heavily watched. Who knew there was so much interest in Roundy's?
I'm not going to stop trying to get page views. That would defeat the point of writing in the first place! But since it could be useful to readers, I've decided that I am going to start posting my page view counts on my instablog. Beginning with my most recent article, if you find yourself in agreement with me I would encourage you to come back and check the indicator.
The other thing you can do with this information is consider becoming a Seeking Alpha contributor yourself. I don't know if the page view indicator will work for every investing style. But if it does, it may be the most useful gut check on your own ideas that you can get.
One More Thing...
I'd be remiss if I didn't mention this article from Dana Blankenhorn. It describes a similar indicator using comments instead of page views.
Disclosure: I am long RNDY, BKS. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am short AMZN