Using data to build out a real-world information advantage.
In sum, markets are a reflection of changes in information. Price discovery comes not from obscure technical factors, but rather from changes in information. So naturally, if one wants to succeed in markets, one must have a robust information framework.
The goal of this will be to walk you through a real-life, hands-on implementation of this approach.
The “Who’s Next?” Approach
For this example, assume we are an investment manager that wants to find new stocks to invest in. We want our approach to capture an information “lag”, so when a news event or award directly influences Stock A, we want to know how that news event will influence Stock B, before news for Stock B breaks out on its own.
There are millions of sources of information, so it’s tough to know where to start, but we will start by looking at what the government is doing. Every day, contractors and companies from all over the country bid on contracts from departments of the federal government. And every day, new contracts are handed out.
These range from $100,000 contracts to supply the U.S. Army with bulk napkins over 2 years, to things like multi-million dollar deals for supplying pharmacy medication to inmates at a federal prison.
To start our search, we leverage tools like OpenBB and get information of all latest contracts awarded:
from openbb_terminal.sdk import openbb
Latest_Contracts = openbb.stocks.gov.lastcontracts()
This returns the following:
Taking BSX (Boston Scientific Corporation) for example, we see that in February 2023, it was awarded ~$785,000 from the Department of Veterans Affairs for Yttrium Microspheres and Watchman Closure Devices. Without turning this into a dive on niche medical technologies, I’ll briefly explain what each of those are:
- TheraSphere™ Y-90 Glass Microspheres: Yttrium-90 microspheres are radioactive particles which are mainly used for treating…