#179: Beat the Market with AI: Faster Investment Research
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Ever wish you could predict market movements? Today on The Richer Geek Podcast, we explore how AI can spot hidden signals in the market. Andrew Einhorn, Chief Executive Officer and co-founder of LevelFields, joins us to reveal how AI can identify events that impact stock prices. Learn how to leverage AI for smarter investing!
In this episode, we're discussing...
Introduction to LevelFields: Learn about Andrew Einhorn's journey from an epidemiologist to the CEO and co-founder of LevelFields, an AI-driven FinTech application designed to streamline investment research.
AI in Investment Research: Discover how LevelFields leverages AI to automate and simplify the process of investment research, enabling investors to identify opportunities quickly and efficiently.
Event-Driven Analysis: Understand how LevelFields focuses on event-driven analysis, monitoring US stocks 24/7 to find events that significantly impact share prices, while ignoring irrelevant noise and opinions.
Case Studies: Hear examples of how identifying events such as dividends, buybacks, and market trends can lead to significant investment opportunities, illustrated by real-world scenarios like the rise of coal companies during the Russia-Ukraine conflict.
Market Manipulation and Bias: Learn how LevelFields cuts through market manipulation and biased information, providing users with clear, data-driven insights that help them make informed decisions.
Future of AI in Investing: Explore the potential future applications of AI in the investment world and how it can make sophisticated financial strategies accessible to everyone, regardless of their level of expertise.
Resources from Andrew
Resources from Mike and Nichole
+ Read the transcript
Mike Stohler
Hey everybody. Welcome back to another episode of The Richer Geek Podcast. Today we're going to talk about AI. AI and investment research. We have Andrew Einhorn. He's the Chief Executive Officer and co-founder of LevelFields. It's an AI-driven FinTech application that automates arduous investment research. So investors like me, and you can find opportunities faster and easier. His mission is to create AI tools that make advanced financial strategies effortless and accessible for all. How are you doing?
Andrew Einhorn
Good, Mike. Thanks for having me on the show.
Mike Stohler
Good. Yeah. Thanks, Andrew. I always start with a little background. You know, who are you? How to get into this AI? Or where do you come from? And how did you get started with LevelFields?
Andrew Einhorn
Happy to dive into it kind of a traditional background. I actually started my career as an epidemiologist. So I was tracking things like mercury contamination in the Gulf, and in Pittsfield, Massachusetts, and former GE properties, got really good at data analysis, statistical analysis, started to consult, went to grad school work for a public company, to their IPO called ICF. International, big government contractors, they do kind of like a science and engineering consultation. I worked with groups like FAA office of commercial space transportation, analyzing orbital debris and horizontal space launches, were basically became the laws for SpaceX to follow, and others on the commercial side, worked for NASA a little bit on the environmental group, creating metrics for them monitoring systems, and then eventually, was working for the Pentagon, and was building a environmental safety and occupational health event and risk management system, the technology platform, and so I took something that was off the shelf, and started to customize it for DOD and I just fell in love with building stuff, I fell in love with the idea of building technologies and sort of shaping the world to what I wanted it to be. And I found I was pretty good at it. So I left that job, started a company that was about 2009, ran it for 10 years, brought it from a napkin sketch to sale to a large private equity firm and 29 team. And that company, we did who monitored events for publicly traded companies and their comms teams, their PR professionals. And so let's say a company like a rail company might have a train to rail, and it might have to in the morning, the executives don't usually break on Twitter, then it goes to a local news story that eventually it's national news. And so our software system would identify that event. So some would take a photograph of the trains in their pool in the backyard. And then that would go on Twitter, we could grab it at that moment, flag it, send it over to the corporate comms officer and say, Houston, you've got a problem, they would drum up their kind of PR machine and say, figure out what they're gonna say like, wow, well is, you know, the oil company put too much oil line, that's why it flipped or the rail was never maintenance, maintained properly by the government, whatever. And in all these events, we serviced about 100 of the Fortune 500 companies, everyone from Exxon, Discover ConocoPhillips, CSX rail and others, as well as companies and hillside and defense contractors like Lockheed Martin. And so ultimately, what we saw is this really positive correlation between events that were happening and their share price movements. So again, and again, we'd be flagging these events, there was a cyber breach, Doc would tank the next day, and then it would go up. And we were making somewhere between $50 to $150,000, a year per contract for this thing. And at some point, we started thinking like, maybe we should invest our own dollars on this. And we kind of kept that on the side, just like on the back burner, ultimately sold the company. And then 2019, the whole group that founded the company and a technical group, we kind of reformed a new entity, we started playing around with AI layers on top of the type of data mining and big data analytics that we used to do to try to come up with new and interesting use cases. And then in the middle of building that COVID happened. So we're kind of like experimenting with different ideas for the business and then crashing over our heads. But this ginormous event, just like other events that we were studying over the last 10 years, and it just became crystal clear that you know, as the market was selling off, and people are very nervous about stocks that we should take our expertise kind of event monitoring and analysis work and unstructured text and transform that into a company that helps everyday investors, independent investors, figure out how events are going to impact stock prices. And as we kind of pushed into that we started learning that much of the market is filled with a lot of opinions about stocks, what's going to be the next Amazon or Google whatever BS article is out there for clickbait. And as we look through it, there's a lot of news, but the news is driven largely by what the companies are announcing. And if we got to the heart of it, it was all just companies and events. And that was what was driving all the action, it was driving the share price movement, it was driving the narratives of the next days, and weeks at CNBC and other outlets. And then it was driving the technical analysis that people were doing when they were looking at momentum trades and coming in. And so we said, we can, now with this AI, monitor every single US stock and the stock market 24 hours a day, seven days a week, and focus exclusively on events, and only events that are correlated to moving the share price. And we can ignore everything else give people the opportunity to find those events that are 30% in a day 50%, there's a couple of them recently, there were 600% in a day, really massive transformational events that are happening when a company is an emerging growth story, or on the other side of it, or they're just completely ready to fold. And they're running out of cash, and they filed for bankruptcy. And so we built a system to monitor for that. And effectively what it does, it's like an AI speed reader is poring through 30,000 documents a minute looking for events, categorizing them, analyzing them, flagging them, and then building like analytical arrays of historical performance of those events, so that you get the the effective output kind of like a weather forecast. And you can say, "Okay, where's it raining?" "Where is it sunny?" "What temperature is it going to be plus or minus a couple degrees, because what's the average temperature in April?" and then you'd be able to know, here's the forecast, like this event happens, it affects it for a day, this other event happens, it affects it for a month, changes and you'll be able to see that on the application to the analytics. And so it takes a lot of sophistication to put that together. But on the other end takes very little sophistication to understand it, because it just shows you "Hey, there's a big green bowl here on the event", that's a bullish indicator, and you can see, that event typically moves the share price 4% in a day, you click a button, you get an alert, and then boom, off you go. You can trade that event, or you can use it just for longer term investing, or you can use it to sort of shorten your research. And so the idea that we have is really, can we automate investment research. So that average person can watch the entire stock market without spending all day looking at charts and graphs and poring through different screens and having six monitors up, like the AI is doing all that for you. And you can set your specific goals and say, I like these types of events. But I only trade tech companies. And I only want companies that are large cap. So if these events happen with these companies, "Oh, by the way, I want to have a dividend of 1%." And then you click a button and you walk away and you go have dinner. And then you go, you know, traveling next day and Sunday at two o'clock, you'll get an alert that an event matched your criteria, and you could pop in for two seconds, make a trade, you know, or adjust your existing portfolio and then walk away again. Now, we're just massively taking, you know, a lot of the time and effort out of it.
Mike Stohler
You know, what I found is, I've been researching some stocks, and I'll use one example. And my question will be once I give the examples, you probably look at biased and unbiased news, because both can affect stock prices. And it's so hard for me, for instance, I just bought a Lucid EV half the time they're gonna fold and half the time, there's an objection, they're gonna last, they're coming out with this, this and this. And for me, it's like, "Okay, I love this car, do I buy the stock?" Why click one video, and then I have to do research on who this person is doing this video? Are they a Tesla junkie? And they're going to talk about, the competitors anyway, and say that it's not going to last. You look at, for instance, the Lucid but there's just, it's both ways, there's biased people, there's unbiased, you take all that and just say, hey, look, everything's affected the stock price, whether it's good or bad, right?
Andrew Einhorn
We try to take all the opinions out of it. So we don't look at opinions at all. We just ignore those sources. We know, the general philosophy is no one knows what's happening inside a company with the exception of a few corporate officers and you know, sometimes, right, so we're under that assumption that anyone who's writing a blog post who doesn't work for that company is just full of it. They don't know what to talk about. We say the same thing. They don't know what's happening there. But the executives do give you little breadcrumb trails of information to go off of, for example, the earnings every four weeks, they'll tell you what the revenue is, the earnings growth, and what their outlook is. Those are super helpful. But along the way, you get other tidbits of information, you get return of capital in the form of share buybacks or dividends, or the increase in your dividend decreasing it, I think worried about cash flow, and they're selling assets off to build cash to pay off debt that they have, you know, built up in the company. So as you see that, like the story begins to unfold, as you look over time, and you see, that this company has raised its dividend, six times in the last one and a half years, that's not an executive team worried about the future, because they're giving away their cash, they don't need it for operations. So they're telling us a very, very strong signal, hey, market, we're fine, we're doing well, things are good. And those are the types of events that we grab and look at on the application, we'll need to hear about some of these, video reviews, because we already know, this company is in a good cash position, their earnings back it up. And then if you have, you know, a little bit of information on kind of the macro scenario, right, where, you know, if lithium prices are down, that's generally good for EVs, for example. So that builds on that tailwind story, you put that together really quickly, and you can see, "Wow, yeah, this looks good." In other cases, we look at kind of, kind of a contrarian signal. For example, in the middle COVID, every company was trying to preserve cash, right, we're all wrapped up in our homes and covered, phases of mass and no one's going outside and no one's spending money. Right. So they're, most companies are freezing their dividends, right, they may be trimming their workforce or finding different ways to preserve cash, because we could be going into a global recession, if not depression. And that was the view in March 2020. But this one company started initiating a buyback program around the same time, and you look at that, you're like, why are they buying back their stock, like, you have to be out of your mind to buy back your stock, or, for some reason, COVID is good for them. And so when you see that, look at what this company is? Well, they need an engineered and architected direct to consumer packaging, or other companies, all the companies in the world that can no longer sell their products through Home Depot, and Target and Walmart on the shelf, all had to design these little packages and send it to your front doorstep, this company designed and created and manufacture those packages. So it was like boom, time for them. They were rolling in clients, they're rolling in cash, right? What happened over the next three years, the company went on to do 2,600% increase in price from that day. And all of which you would have found if you just were monitoring some of these positive events. But you don't see these small signals as an average investor, because you can't possibly read that much news, right? filter all the junk, filter all the opinions out, right? And that's where the AI comes in. It does that for you. And then you find things like little juicy tidbits that you didn't even know existed in industries that I didn't know existed. We see those stories again, and again, like when, you know, when Russia invaded Ukraine, we saw a whole bunch of coal companies paying special dividends. What is this one company doing like an $11 share dividend, which is like 8% of the company, from a yield perspective, right? In a one time dividend. So you're looking at like, why that helps. You can make 8% Just by buying the stock, holding it through the ex-dividend date and receiving that dividend. And most people would have to wait a year for that kind of return. Plus they had a 4% dividend already. And they were doing buybacks. And you're like what is going on with coal and you quickly look and you see three or four coal companies doing the same thing. You go, I wonder what's happening with coal you type in you see, the price of coal had quadrupled, or such, I forget the exact number it increased, but it was by a lot. And the reason was when the Russian Shut off the gas pipeline, the rest of Europe had to go and ignite their coal fired plants to build the energy. And so all of a sudden, there was a demand for coal again. So you see these sort of counter indicators and indicators, and you can completely cut out the Bs in the market, where there's so much potential market manipulation. I mean, whether it's on Reddit or blogs or Tik Tok, everyone's trying to pump up certain stocks and even CNBC. Generally, billionaires don't come on television and give you their favorite stock picks for no reason. They're offloading it to you and trying to sell you on buying it. Like they need to sell 10 million shares. Can't get a buyer. So you're gonna go on TV and say, "This is why I love Coke and Pepsi." Then as they're selling Pepsi you're buying. So we wanted to get around all of that, because it felt like the market was just unfairly right rigged in favor of those who had access to the media, those who had access to the information, those who had 200 analysts at their disposal that they could go and say, "Hey, go study 25 different sectors and tell me, which which sectors are going to do well, or industries going to do?" Well, when a big event happens, like COVID, when we can do it, now we do it through level fields, or AI picks that up, and it gives you an interface that looks a lot like going and getting flight. Right. So I'm just checking on a day, like, what's going on in the market. There are 25 different event types, all with some kind of forecasted bullish bearish moves, we can see what happened yesterday and how those events panned out. So it's very much reinforcing itself, and that, you don't have to distress the platform, because the numbers are right there. And if you want, you can just pick a small subset of like 1000s of events that come through, and just say, I really like this one type of event, like when a company increases their dividend by a large amount, that's usually a bullish indicator, I'm gonna buy that I'm going to hold it for 10 days, two months, sell it, make 10% go and do it again. And again, we have all kinds of users, we have a lot of option traders, we also have a lot of engineers, and technical people that will kind of create their interesting ways to use the site, and their own, you know, automated web hooks and trading in the background using alerts. But one of the things that I'm thinking about one user in particular told me, they aim to make like a quarter percent a day, every day, that's all they want. And but if you look at a quarter percent per day, one and a quarter per week, you know, you got about almost five per month, and you're at 60% per year, that's better than two times what the top hedge fund in the world makes. There's lots of different strategies that people employ on the system. And for us, it's more about accessing information and doing it in a way that's non biased. That's data driven, that cuts through the garbage that is just littering the web, you know, when it comes to stock picking services and sites and trying to find a different way to do things. So we do event driven analysis, that can be paired with fundamental analysis, which is also available on a system through the filters. And people who do technical analysis can pair it with what they're doing to understand why a stock is hitting a ceiling or a resistance level or going and gapping up and those types of things, because they're typically caused by events which we track.
Mike Stohler
Again, everyone, it's levelfields.ai. It seems like, now you've created this AI for people like me that are just busy all the time. And I don't have time to do what I am going to do from 10 o'clock at night till two in the morning study, you know, and make my picks. Because that's really what it takes. You can't just do a five minute thing, if you don't have any tools, so it seems like LevelFields has kind of taken all that. We're in what I call the drive thru era, the fast food, we want everything quick. None of us have time to do a lot of research, especially when it comes to money in LevelFields.ai seems like it does that for us. Who is perfect, who goes to your site? Who uses it? Is it just individual people? You said you have some commodity brokers? Are you a brokerage house yourself? Or is it just an AI platform for day traders or people like that?
Andrew Einhorn
It's an information service. So we don't want our brokerage system to make the trades on a different platform. In terms of that type of people use it, we have long term investors with a lot of options traders, we have some day traders, we have a lot of swing traders. It's anyone that is not looking at a five year timeline, although what we find is, if you think about asset allocation, right? You think like, here's my long term investors, my 401(k), I got my Apple's, my Google's, my Amazon's, whatever, I'm not going to touch those, I'm gonna keep them in. But you also need to have other types of investments, right? And so this look at the kind of shorter end of the trading typically, you might have one day, or you might have two years for your whole time. And it's a different type of asset allocation. So you could have a lot of folks that will put 5-10% of their money into this type of trading, while keeping 50% and long and then maybe 20% in real estate. And they break it up that way. It's really a broad base of users, get everybody who's from like, people on Wall Street for 30 years that were retired now they're trading on their own without their firm, to someone who opened a Robinhood account last year or two years ago and realized, "Oh, gee, I need an actual strategy to make money in the market." But I don't want to just sit there, for the next 20 years waiting to see if my model picks are correct. And our philosophy is very simple, very difficult for no company that's going to be successful. 10, 20, 30 years from now, it's almost impossible.
Mike Stohler
We'd all be billionaires.
Andrew Einhorn
Yeah.
Mike Stohler
We wouldn't do that.
Andrew Einhorn
We would go back and you see, like GE was the biggest company on the planet in 2002, it didn't really pan out well, on an investment for 20 years. So what we do is, we can say, we can see what the next two weeks looks like, four weeks, six weeks, 12 months, even. That's pretty simple, right? That's within view. So don't try to provide events and say these are, these are for years, it's like, well, if you could make 10% a month, each month of the next 12 months, and do that again, and again, and again, you're gonna kill it, you're gonna crush it. So we get lots of different people who some are doing two or three trades a day, some are doing two or three trades a month. And it will take them 5-10 minutes to trade between getting the alert from us and turning around doing something with it. And we do have probably 5-10% of users that are using it just to monitor their existing portfolio. For the same reason, they don't have time. So they put in here the 30 stocks I own, just let me know when something big happens. And then I'll read the news at all, they just wait for the alert. And if something says, "Oh, they're doing a dividend reduction, or this hedge fund is short selling your company that you own, then you can get out of it quicker." And likewise, you can see with the analytics how to play it, right. So Bezos leaves Amazon, should I get an Amazon? Or do I look at a system and say, "When a CEO departs from a large company, yes, it goes down 2% on the first day, but typically, within two months, it's actually higher." So this is a buying opportunity. So to avoid some of that emotional behavior that we all kind of are prone to as humans reacting to our money, like disappearing. And we're like, "Oh, I gotta get out real quick." And you can look at the data and say, well, the data doesn't show that data shows that 80% of the time, this doc is actually gonna be up in two months. I'm gonna load up, I'm gonna buy more.
Mike Stohler
Yeah, that's very good. And listeners out there, say, I want to check this out. And the good levelfields.ai, what are they going to find? How do they get started, when they click on your website?
Andrew Einhorn
Yeah, you just click, go to the application, you can put in a promo code that we use for podcasts like this, if you want to use PODCAST23, you get a pretty significant discount, the word PODCAST and the letters, the numbers, 2-3. And when you sign up, you'll be directed through a kind of onboarding flow and give you a tour of the platform, you'll get a series of emails that kind of show how to use it. On the platform, there's a lot of tutorials, there's a lot of help text that says, what is this type of event? How does it trade, you'll see, sometimes some ideal hold times on the event description itself, this is a 6 to 12 month hold time, or this is a two week hold time. And the numbers throughout will give you that indication that, okay, there's a 80% win rate for one day, there's a 70% win rate after 10. It's not really rocket science, it's all kind of laid out nicely. And then if anyone has questions or needs extra help, we have a more premium subscription service where our analysts are actually sending out kind of the trade setups based upon the data that we see. And saying, here's a good equity trade, here's a good option trade. It's a more expensive service, but it's like white glove, everything's done for you. You don't have to think you just have to plug it into your brokerage system. And that particular service amazingly, since we launched, it is up like 3,300% on the trade alerts.
Mike Stohler
Wow. Yeah.
Andrew Einhorn
Put a number of interested hedge funds reaching out to us for some more information.
Mike Stohler
Yeah, why create your own AI when they can also go to humans and get some help, right?
Andrew Einhorn
That's right.
Mike Stohler
It's a win-win for everybody. Andrew, before we leave, is there anything else that I did not cover that you'd like to share to our listeners?
Andrew Einhorn
Just say, you know, if you're on a bicycle, or at the gym right now, you may be thinking, "Yeah, this is not for me." But most likely know somebody that this is going to be a fit for who might be using it for educational purposes, or even using it, to trade. Just text yourself the name levelfields.ai, base subscriptions, and then a couple 100 bucks a year, so it's well worth the price of admission.
Mike Stohler
Yeah. And you know, for all of us in The Richer Geek, we've always strived to inform people to diversify your portfolio. Stay in stocks. But if we're going to be in stocks, this might be a better way and then the financial advisors in some of the other ways that you do it, and you probably save a lot on the front end and the back end by doing it yourself and by using LevelFields. In this episode, everybody is brought to you by REI words, your go-to SEO agency for increasing traffic to your website. Do you know what your domain rating is? Have you thought about a naturalistic, organic way to build your website and promote it through media and SEO? Check it out at reiwords.com. Andrew, it's been a pleasure. And thank you so much for coming on The Richer Geek Podcast.
Andrew Einhorn
No, likewise. Pleasures all mine. Thanks for having me. Nice talking with you.
Mike Stohler
Thank you.
The information, statements, comments, views, and opinions (collectively, “Information”) provided in this podcast are not intended to be and should not be construed as financial, economic, legal, accounting, tax or other advice. For our full disclosure, click here.
ABOUT ANDREW EINHORN
Andrew Einhorn is the Chief Executive Officer and co-founder of LevelFields, an AI-driven fintech application that automates arduous investment research so investors can find opportunities faster and easier. His mission is to create AI tools that make advanced financial strategies effortless and accessible for all. With over 10 years of experience in building and leading technology and tech-enabled service firms, Andrew has a proven track record of delivering innovative solutions that solve real-world problems and generate value for customers and stakeholders.