Everybody's an Analyst

Investment research + wiki = a potentially very different kind of Web site By JEFF D. OPDYKE December 17, 2007; Page R8

Wikipedia has transformed encyclopedic research, though for better or worse is a subject of debate.

Now the same kind of debate is unfolding around Wikinvest.com1, a Web site for investors that lets anyone with an Internet connection contribute and edit information about publicly traded companies, financial markets, and how to make money off of both.

THE JOURNAL REPORT

2 A primer for investors3 who are considering commercial real estate to build up their nest eggs. Plus, worried about what will happen4 to your pets after you're gone? Estate lawyers have it all figured out. • See the complete Your Money Matters5 report.The product of two Harvard University students who spent off hours day-trading stocks online, Wikinvest marks the latest effort at democratizing investment research, this time through the growing popularity of social networking.

Wikinvest itself doesn't report on companies or markets, or even make recommendations about stocks. Its contributors do all of that, writing and editing reams of information about businesses and market trends, and posting earnings data and stock charts that include attempts to explain price moves.

Articles fall into several categories: company profiles, which try to be neutral; bullish and bearish outlooks about those companies; and concepts, which tend to focus on market trends.

A recent example is the subprime-lending crisis. A page on Wikinvest explains the crisis, how it developed and how the ultimate impacts ripple through potential winners and losers in the stock market. It's up to the investors to use all the information to fashion their own buy and sell recommendations.

The site bases its operation on the theory that a large group of people analyzing a particular situation will, in general, do better than any particular analyst or even a relatively small group of analysts. Contributors to Wikinvest can reveal as much as they want about themselves, or nothing at all.

Post Policing

Posting on the site requires registering and adopting a user name, which can be real or assumed. Some use only initials or numbers. The user name is then posted alongside everything the user writes or edits. This is meant to keep contributors accountable, or to make it easier to spot those whose work proves unreliable. That's done through peer review and algorithms that help determine reliability of content someone posts by, among other things, tracking how long their postings remain unchanged.

A recent visit to the site found a total of nearly 400 contributors, who, according to descriptions of themselves that they post on Wikinvest, range from professional money managers and equity research analysts to college students and self-proclaimed beginning investors.

[Image] MONEY MEN Wikinvest's Mike Sha and Parker Conrad

Wikinvest is seeking traction in one of the most highly contested corners of cyberspace. Nearly 17 million U.S. investors trade online. Banks, brokerage firms, news organizations and financial Web sites for more than a decade have competed for online users, with household names like Yahoo! Finance, MSN Money and AOL Money & Finance leading the crowd, according to comScore.com6 Inc., a market-research firm based in Reston, Va., that tracks online sales and traffic.

Because Wikinvest.com is so new -- the site officially launched this fall -- it doesn't yet appear in comScore's rankings.

"Online investment sites haven't changed in the past decade," says Parker Conrad, a co-founder of Wikinvest. "They're still essentially what they were" when Yahoo! Finance and others emerged in the late-1990s, Mr. Conrad says, providing basic stock charts, quotes, news and corporate financial data tied to specific ticker symbols.

But Wikinvest's all-inclusive approach raises the question: What does your neighbor -- or even a dozen of your neighbors -- know that the analysts on Wall Street don't or can't figure out? As a group, your neighbors' ideas might have more breadth.

The trouble is, breadth doesn't necessarily come with accuracy. Moreover, analysts -- for all their warts -- still have far greater access to companies, employees, corporate management, suppliers and competitors, which is obviously worth something when it comes to building the mosaic of information that attempts to convey a company's future prospects.

Wikinvest's entries, by contrast, are penned by a broad range of investors who layer their own research on top of each other. Each entry, on a stock or a theme, includes separate pages for bullish, bearish and neutral commentary so that investors better understand a company or investment idea. Annotated charts, meanwhile, offer explanations for big moves in share prices.

In a chart for banking giant Citigroup Inc., for instance, where the shares dived more than 12% in mid-October, a pop-up dialog box explains that Deutsche Bank AG had just downgraded the shares and that Citibank had announced a write-off of $5.9 billion in subprime loans.

No Guarantees

As with other wiki-type Web sites, Wikinvest's research model is not immune to vandalism, hype or fraud. Hucksters can, for instance, create bogus pages to pump up or drag down a particular stock for their own benefit. Or, even if they post accurate information, they can claim to be someone they're not, lending an air of unfounded legitimacy to whatever investment position they stake out.

Mr. Conrad says that while vandalism has happened on occasion, the nature of a wiki site means pages are frequently patrolled and unsubstantiated claims and patently false information are ultimately excised by the original writer or other users.

The upshot: The only information left in place is that which the Wikinvest community generally agrees on, though that doesn't ensure that the information is necessarily correct.

Someone who wants to make something up "has to sit down and type it out, and I can undo it with two clicks of my mouse," Mr. Conrad says. "That's going to take the fun away for them at some point."

Beware JohnInvestor23

Moreover, Mike Sha, Mr. Conrad's partner, says "most people would never place real money on what JohnInvestor23 says he's buying." Mr. Sha says the point of Wikinvest is to "provide the rationale for thinking about an investment you're going to make," not to provide the buy or sell advice itself.

Messrs. Conrad and Sha say their goal is for Wikinvest ultimately to make money through advertising, but for now they are focused on getting the site established.

The site has about 25,000 pages in various levels of completion. Some are full reports, others offer a single, marginal argument on the bullish or bearish side. Some entries, such as AMR Corp., the parent of American Airlines, were nothing more than a stock chart on a recent visit to the site.

Scott Redmond, who runs Redmond Asset Management in Richmond, Va., and is a Wikinvest contributor, says Wikinvest "is the next step in the evolution" of how investors use the Internet for research.

Pointing to the page for pharmaceutical firm Schering-Plough Corp., to which he has not contributed, Mr. Redmond says "this is just amazing. All the material that's here, and that takes me 10 minutes to read, would take an hour to collect" though annual reports and other sources.

"In time," Mr. Redmond says, "there will be this type of information on [thousands] of companies, and that's a much more efficient organization" of information.

As for the information itself, Mr. Redmond says he was "absolutely surprised to see the thoughtfulness of the opinions being crafted."

--Mr. Opdyke is a Wall Street Journal staff reporter in Baton Rouge, La.

Write to Jeff D. Opdyke at jeff.opdyke@wsj.com7

QUESTIONS:

1.) What is "Wikinvest"?

2.) What advantages does Wikinvest have compared to a traditional analyst?

3.) What disadvantages does Wikinvest have compared to a traditional analyst?

4.) How does the anonymity of contributors at Wikinvest impact the value of the information on the site?

5.) How does Wikinvest intend to overcome any weakness that results from anonymity?

6.) Which do you expect is most likely? a) prices reflect information not on Wikinvest, or b) Wikinvest has information not reflected in prices? Justify your answer.

Reviewed By: Steven P. Rich, Baylor University