(Bloomberg) - JPMorgan Chase & Co. is testing a new research product to guard big-ticket clients from losses linked to the meme stock phenomenon that has captivated Wall Street this year.
Around 30 asset managers and quant fund managers have been trying out the “Through the Retail Lens” data offering since September, the bank said. It’s a response to the surprise that hammered investment professionals in January when day traders rushed in to buy stocks, sending the share price of firms including GameStop Corp. and AMC Entertainment Holdings Inc. soaring.
The screening tool is a dataset on U.S. retail investor trends sold to institutional clients. It provides predicted retail flows, significant buy or sell signals on single stocks, negative or positive sentiment based on the bank’s internal data and scouring of social media forums, such as Reddit or Twitter.
Data shared with clients include the size of retail flows, the most discussed stocks on social media and companies that are likely to face a retail ‘squeeze’ -- when small investors rush to a stock that hedge funds are betting against.
Apple Inc. was identified as a top retail favorite on Dec. 6, based on positive sentiment on social media and in-house flow intelligence analyzed by the product. Apple shares are up about 8% so far this week.
Driving Blind
“If you don’t have a clear view of what retail is up to, it feels like you’re driving partially blind,” said JPMorgan’s Chris Berthe, global co-head of cash equities trading, by phone. The lens is also serving as a guide to JPMorgan’s own traders.
JPMorgan said it is hoping that it will help drive trade ideas for clients and that some quant funds have shown interest to incorporate the product into their models to enhance alphas.
The focus isn’t just on meme stocks: During the Black Friday selloff, retail investors were big buyers and that’s the kind of signal billion-plus dollar funds actively seek, he said. “That was a real source of interest for our clients.”
Until recently, so-called retail traders were seen as small-time players dabbling in stock markets. But Covid-led lockdown boredom and the rise of zero-commission trading now means amateur investors make up 20% to 30% of trading volume in the U.S., according to JPMorgan.
By Thyagaraju Adinarayan
