Social media isn't only about sharing pictures of family and opinions on trending stores – it can also be used to identify stocks to invest in. Investing isn’t an exact science, nor is using social media to identify investment opportunities, but social media can be used as a screening tool, says Fidelity Investments, which offers its customers access to a stock's social sentiment measured by the S-Score. S-Score is a tool provided by Social Market Analytics and is part of the Boston investment firm's arsenal of research tools. With it, investors can get a sense of how social media users are viewing a company and whether the sentiment is improving or souring.
With the tool, which Fidelity recently highlighted in an online video tutorial, investors are able to cut through the sheer volume of data on social media to ascertain how the company is faring on the opinion front. While not everyone on social media is an investor, if scores of people are outraged about a move a company made or are applauding a company-specific development, it could have an impact on the stock. The scores range from -4.25 to +4.25, with a score above three extremely positive and a number below negative three extremely negative. A score that falls between one and negative one means that the sentiment is neutral.
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Knowing if the conversation on a particular company on Twitter is more positive or negative than normal can help investors measure the impact of breaking news and in some cases provide an early warning of a potential market move. A positive score could result in an increasing stock price, while a negative score could signal that shares are going lower, Fidelity said.
Fidelity Investments' S-Score is just one example of the research tools it offers clients, and it is one of the reasons that Fidelity has been receiving accolades for its research capabilities. With exchange-traded funds exploding in popularity, financial publisher Benzinga recently named Fidelity Investments as the best place to go for ETF research. In giving Fidelity a positive ranking, Benzinga pointed to the market research that the firm offers its clients, which is drawn from 20 different providers. Clients receive access to analyst ratings, ETF reports, equity summary scores and mutual fund fact sheets, among other things.