Estimize.Com Bets That Crowds Are Smarter Than Wallstreet Analysts.
Every three months at Wall Street, companies conduct earnings conference calls. And in these conference calls, companies undersell their expectations via the term "conservatism," and brokerage firm analysts not wanting to turn away corporate clients follow the lead and give out deliberately low estimates. Three months later, companies report their earnings again, and this time, they beat Street consensus, and their stock prices rise, albeit temporarily.
Estimize creator Leigh Drogen, a former hedge fund professional, is out to change this practice. With Estimize, he envisions a new form of crowd control to bridge the gap between the official analysts' consensus and what the investment community really thinks about a company's earnings. Estimize is an online platform where anyone can sign up for free. More than 4,300 people so far have already registered, 77% of which are self-identified as independent, 20% as buy-side and 3% as sell-side.
Once logged in, members look up a stock and then enter guesses for revenue and earnings per share. While there may be too little indication to come up with a conclusion, so far, estimates of the Estimize crowd have been closer to actual results 63% of the time.
Estimize not only aims to correct corporate spinning or guidance, it also aspires to open doors to newcomers and help spot unknown talent.
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