Alternative data investing: Why connected vehicle data is the future

21 Nov 2023

Image: INRIX

Inrix’s head of product Phil DeFrancesco gives an insight into the trending field of alternative data investing and explains why using geolocation data is a safe bet.

In the ever-evolving world of stock investing, the constant hunt for a competitive edge is real. According to a recent article, only 39pc of fund managers beat the market over 12-month periods. The data we use, its sources and how we interpret it, often make the difference between a lucrative investment and a missed opportunity.

Enter alternative data, a burgeoning sector that promises to revolutionise the investment landscape.

Understanding alternative data

Alternative data pertains to information derived from non-traditional sources. This could range from satellite images to online reviews. Its emergence challenges the conventional wisdom of stock investing by augmenting traditional data sources, such as quarterly reports and economic indicators.

According to a recent survey, 98pc of investment professionals agree or strongly agree with the view that the use of alternative data is becoming increasingly important to identify innovative ideas and boost alpha.

The true power of alternative data lies in its compatibility with both quantitative and traditional fundamental analysis. By employing alternative data, an investor can paint a comprehensive picture of a company’s health and trajectory.

Given its potential, it’s unsurprising that the alternative data industry is booming, as the “global alternative data market size is anticipated to reach $135.7 billion by 2030,” according to a recent report.

This growth is spurred by a myriad of new alternative data sources, the financial services industry becoming more inclined to use alternative data to derive predictive insights, and the inclusion of fresh markets as more countries recognise its value, in particular the Asia Pacific region.

Geolocation: At the vanguard of alternative data

One of the most promising subsectors of the alternative data realm is geolocation, standing at an impressive valuation of $400 million. Geolocation is prized for its ability to correlate ground-level activities to consumer trends, business health and revenue.

But within this sphere, the real game-changer is ‘connected vehicle’ data.

Connected vehicle data, a subset of geolocation, is an invaluable resource for investors. It enables analysis of both passenger car and truck activities across almost any location. This opens a window into consumer trends, helping investors decipher current demand dynamics before company earnings calls.

Moreover, tracking truck activity provides insights into a company’s supply chain health. By monitoring truck traffic at key economic areas – be it manufacturing facilities, warehouses, distribution centers or seaports – investors can gauge a company’s production, distribution and supply chain efficiencies.

This level of detail can provide a holistic view of a company’s operations and its future revenue potential.

Why use connected vehicle data?

When juxtaposing connected vehicle data with other geolocation datasets, its superiority is clear, especially when the comparison is with mobile phone data.

While mobile phone data was once seen as a goldmine for tracking and analysing human activity, it has faced increasing challenges. These include privacy concerns. There’s a growing unease about tracking individuals through their mobile phones. This has been compounded by tightened regulations and rising concerns about user consent and data misuse.

Also, many apps aren’t designed for high-precision GPS tracking, yet these data feeds are relied on to provide mobile tracking, which in turn introduces noise and inaccuracy. This, combined with unreliable and sometimes unscrupulous data sources, has been diluting the value of mobile phone-based geolocation data.

And with leading players departing the mobile phone data scene, there’s been a scramble to fill the gap. This often leads to a compromise in data quality.

Connected vehicle data, on the other hand, can offer accurate data about vehicular movements. And because vehicles are tracked, not individuals, this data collection offers a level of detachment that’s becoming increasingly essential in our privacy-conscious world. And unlike mobile phone data, connected vehicle data provides insights into both trucks (supply chain) and cars (consumer trends), making the analysis richer and more nuanced.

On track for the future

In the relentless quest for investment excellence, every edge matters. Connected vehicle data represents a potent tool in an investor’s arsenal. By offering insights into consumer behaviours and supply chain dynamics, it can sometimes forecast the future growth or decline trajectory of a company before traditional financial metrics signal any change.

In a world inundated with data, what truly counts is the quality, relevance and actionable insights that a dataset offers. Connected vehicle data, with its precision and depth, promises to be a cornerstone of informed investment decisions in the future.

By Phil DeFrancesco

Phil DeFrancesco brings more than 25 years of proven trading and fintech experience to his role leading the Financial Services business at INRIX, a world leader in connected vehicle and mobility data.

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