Thomson Reuters has introduced a model to predict which stocks fund managers are likely to buy and sell from their portfolios.

"The main driver in our research was to determine what funds are likely to do next, rather than reacting to what they have just done," says Stephen Malinak, global head of intelligant analytics at Thomson Reuters. "The basic idea is that we have reverse-engineered fund managers' stock selection processes to predict what changes they are likely to make to their portfolios based on a comparison of individual stocks to the fundamental characteristics they appear to care about most."

The new StarMine Smart Holdings model combines ownership data, corporate finance data and a proprietary predictive meausre of analyst revisiohns to determine how well a company is aligned with the current preferences of institutional investors. The model is provided through a daily data feed as well as desktop applications such as Thomson ONE and Datastream Professional.

The model is based on the premise that fund managers tend to buy companies with particular fundamental characteristics such as price-to-earnings, estimate revisions or price momentum. StarMine SmarktHoldings determines which of 25 widely followed factors are currently important to a given fund owner and with what relative importance to create a purchasing profile for each fund. The purchasing profile is applied against 40,000 stocks globally to determine which may be attractive to a given fund. The resutls are aggregated across funds to provide a gauge of a stock's attractiveness to the current market preferences. The end result is a predictive model that ranks stocks on future increases or decreases in institutional ownership indicating which stocks will become more or less attractive to investors. The model is provided as a daily data feed as well as through a range of desktop applications.

Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com)

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