By Chris Taylor
NEW YORK, Sept 12 By now, we all know what
social media is best for: Instagram shots of your delicious
brunch, videos of cute kittens and a twerking Miley Cyrus.
But could your Facebook and Twitter streams also be a rich
mine of potential stock ideas?
The folks at LikeFolio.com think so. The service, which TD
Ameritrade Holding Corp and Louisville, Kentucky,
developer SwanPowers LLC launched in August, scans your social
media feeds for the top five stocks that you and your buddies
are talking about and spits out a hypothetical portfolio.
The service is free, but for it to work, you have to grant
access to your Facebook and Twitter accounts, which might give
some privacy activists a stroke (even though LikeFolio promises
not to post on walls, share your data or spam your friends).
"It's all about allowing people to use social media to
extract greater value out of that dialogue," says Nicole
Sherrod, managing director of TD Ameritrade's trader group.
"It's like the old Warren Buffett concept: Invest in what you
A fun idea, that there might be some real wisdom in the
torrent of tweets out there. But that notion alone is enough to
give some personal finance experts the willies. "I find it
terrifying, to be honest," says Cliff Robb, an associate
professor of personal financial planning at Kansas State
There is no doubt that the idea of leveraging Twitter for
stock ideas has some investors and academics very interested
indeed. Associate professor Johan Bollen of the University of
Indiana's School of Informatics and Computing has published
studies of how moods prevailing on Twitter can affect share
As a result, hedge funds have been trying to figure out how
to turn billions of tweets into cash. In 2011, Derwent Capital
Markets' Absolute Return fund became known as the world's first
"Twitter hedge fund." It later shut down, only to return earlier
this summer as the Cayman Atlantic trading platform, with a
broader, but still Twitter-focused investment approach.
Intrigued by the idea that my friends and neighbors might be
founts of fabulous stock tips, I plugged my own information into
LikeFolio. The top five stocks spit out: Facebook Inc,
Apple Inc, Google Inc, Yahoo Inc and
A tech-heavy portfolio, perhaps because of the nature of the
milieu. The good news: $10,000 invested in those stocks would
have turned into $16,261 in a single year, garnering me 62.6
percent annual returns over the past 12 months. Maybe there was
something to this idea after all.
JUSTIN BIEBER PORTFOLIO
LikeFolio even allows you to compare your own top stocks
against those mentioned in celebrity social media feeds. In
fields like music, sports, and entertainment, the minds of 162
top celebrities like Justin Bieber and Taylor Swift are probed
for their musings on companies that are publicly traded.
Their top five results: Nike Inc, Google, Apple,
Facebook and Viacom Inc, with a $10,000 investment up
$3,887 in a year. Well-played, celebrities, but not quite up to
the gains my friends and I would have generated. Take that, Lady
Of course, underlying this whole venture is a troubling
question: Do social media mentions actually translate into solid
To which Kansas State's Robb clicks: Dislike!
"The idea that we could take this mass of tweets and suggest
what qualifies as a good investment is very scary to me," says
Robb. "Just because something is well-regarded in social media
doesn't make it a sound investment."
Robb suggests that newbie investors, targeted by LikeFolio,
would be better served with broad-based, low-cost index mutual
funds. Such funds would probably include the companies that pop
up on Twitter feeds, without the risk of betting on just a few
And the idea of basing one's investments on the chitchat of
celebrities, who are not generally known for their financial
acuity? A nonstarter.
"If it is purely for entertainment value, that's fine," Robb
says. But from an investment standpoint, "I shouldn't be
concerned with what products Miley Cyrus is buying."
But TD Ameritrade's Sherrod says the ultimate goal of
LikeFolio is to instill a general interest in investing among
neophytes and get people in their 20s and 30s comfortable with
the stock market after a harrowing decade of ups and downs.
That makes sense - brokerages are going to need a new
generation buying equities. Once LikeFolio users' investing
interest is piqued, they are funneled to TD Ameritrade.
"When they are ready to take the next step, they can open a
brokerage account and start to go deeper, like learning about
fundamental analysis," Sherrod says.
Speaking of such due diligence, another of the companies
that pops up in my social media feeds is Yum Brands Inc,
parent company of KFC. Maybe it is time to do a deep dive into
its fundamentals, with a family-size bucket of chicken.