Estimize is a startup trying to discover the true “whisper number” of public stocks — not just the official analyst consensus, but what Wall Street really believes. To make that happen, it’s encouraging investors to post their own estimates — and they’re getting a little more incentive starting today, thanks to the new Estimize Challenges.
CEO and co-founder Leigh Drogen previously worked at social finance startup StockTwits, where his roles included product manager and media director. Drogen says he first had the idea for Estimize there — he sees it as the quantitative flip side to the conversations that you find on StockTwits. So each quarter, Estimize members can post their guesses for a company’s earnings per share and revenue. Then you can see the aggregate prediction of the Estimize community, as well as current and past predictions for individual users.
One of the first things that you see on the Estimize website is a jar full of marbles, and that hints at Drogen’s big thesis — that as a group, investors can be smarter than any analyst. It’s the same principle behind the carnival game where you have to guess how many marbles in a jar. Usually, if you average the guesses out, you’ll get an answer that’s more accurate than all or most of the individual guesses.
Of course, to tap into the wisdom of the crowd, you need a crowd, and in the case of Estimize, Drogen says he originally thought he’d need to reach around 10,000 estimates per quarter before the data was interesting to financial companies. Estimize got 2,500 estimates in its first quarter, but Drogen says he’s already starting to get interests from major hedge funds. After all, he says the 3,600-member Estimize community is already more accurate than the analysts 63 percent of the time.
Since you can see each user’s track record, there’s already some social pressure to do well. The Challenges take that a step further with a gamification layer and prizes. Drogen says The Challenges cover five investment categories: Internet, software, hardware, consumer, and retail. (There’s a sixth prize that’s not category-specific, and is sponsored by Investors Business Daily.) Each category includes 30 stocks, and competitors have to make estimates in at least 15. The best estimators will get cash (there’s a total of $10,000 at stake) and badges for their profile page, which Drogen says is being transformed into a “Fitbit-like dashboard” for tracking your progress. NASDAQ is sponsoring the five sector-focused contests.
Drogen says the contest is the first step in his goal of “providing tangible benefits and a way to really promote yourself as a great analyst.”
Estimize is a buy side and independent analyst estimates platform. The firm was founded in 2011 by former quantitative hedge fund analyst Leigh Drogen, with the belief that sell-side analysts are not correctly incented to provide accurate and unbiased earnings analysis due to inherent conflicts within the investment banking construct. By crowdsourcing estimates from a diverse community of individuals, Estimize provides both a more accurate and more representative view of true expectations. 2682 analysts contribute to Estimize on over 900...