finance terms

Alternative Data

Data from nontraditional sources that investors use to understand company performance beyond normal financial reports. Examples include credit-card transactions, app usage, web traffic, pricing, and foot traffic. This is the core category of data M Science analyzes.

Institutional Investor

A professional organization that invests large amounts of money, such as a hedge fund, mutual fund, pension fund, or asset manager. These are major customers for investment research and alternative data.

Hedge Fund

An investment firm that manages money for investors and uses flexible strategies to try to generate strong returns. Hedge funds often pay for research and alternative data because they are constantly searching for an informational edge.

Asset Manager

A company that professionally invests money on behalf of clients. Hedge funds, mutual-fund managers, and other investment firms can fall within the broader asset-management industry.

Buy-Side

The side of finance that actually manages and invests money. Hedge funds, mutual funds, pension funds, and asset managers are buy-side firms. The buy-side is a major customer base for M Science.

Sell-Side

Financial institutions that provide services such as research, trading, brokerage, and investment banking to investors and companies. Jefferies, which owns M Science, is a sell-side financial institution.

Portfolio Manager (PM)

The person responsible for making the final investment decisions for a portfolio or fund—what to buy, what to sell, and how much capital to allocate.

Analyst

A professional who researches companies, industries, or investments and develops views about how they will perform. At a hedge fund, an analyst may research an opportunity and recommend it to the portfolio manager.

Equity

A share of ownership in a company. In finance, "equities" generally means stocks.

Equity Research

The process of analyzing publicly traded companies to understand their businesses, financial performance, future prospects, and potential value as investments.

Investment Thesis

The central argument for why an investor believes an investment will perform a certain way. Example: "Chipotle's customer traffic will grow faster than Wall Street expects, causing earnings to beat expectations."

Long

Owning an investment because you expect its value to increase. If you're long a stock, you generally make money when the stock rises.

Short

A position designed to profit when an asset decreases in value. An investor may short a company because they believe its performance will be worse than the market expects.

Long/Short Equity

A common hedge-fund strategy where the fund owns stocks it expects to outperform while shorting stocks it expects to underperform.

Alpha

Investment returns above what would be expected from the broader market or relevant benchmark. In simple terms, alpha is the extra return generated by having an investment edge.

Benchmark

A standard against which investment performance is measured. For example, a U.S. equity fund might compare its performance with the S&P 500.

Public Company

A company whose shares trade on a public stock exchange and that must regularly disclose financial information to investors.

Quarter

A three-month financial reporting period. Public companies generally report financial results four times per year.

Earnings

A company's profits. In investing, "earnings" can also refer broadly to the quarterly event when a company announces its financial results.

Earnings Report

A company's quarterly or annual release showing financial results such as revenue, profit, margins, and important business KPIs.

Earnings Call

A call after an earnings report where company executives discuss the results and answer questions from analysts and investors.

Revenue

The total amount of money a company generates from selling products or services before expenses are deducted. Often called the "top line."

Net Income

The company's profit remaining after expenses, interest, taxes, and other costs are deducted from revenue. Often called the "bottom line."

Margin

The percentage of revenue remaining after certain costs. Investors analyze margins to understand how efficiently and profitably a company operates.

KPI (Key Performance Indicator)

A measurable metric that shows an important part of a company's performance. Different industries have different KPIs—for example, same-store sales for restaurants, subscribers for Netflix, or iPhone units for Apple.

Same-Store Sales

A retail or restaurant KPI measuring sales growth at locations that have been open for a comparable period. It helps investors understand whether existing locations are actually becoming more productive.

Consensus Estimate

The average expectation among Wall Street analysts for a company's future financial results or KPIs. Investors constantly compare what they believe will happen with what consensus expects.

Beat

When a company's reported result is better than Wall Street expected. Example: revenue comes in at $10 billion when consensus expected $9.5 billion.

Miss

When a company's reported result is worse than Wall Street expected.

Guidance

Management's forecast or expectations for the company's future performance, such as expected revenue growth or profit for the coming year.

Market Expectations

What investors collectively expect to happen in the future. Stocks often move based on whether reality is better or worse than expectations—not simply whether the company's results are objectively good or bad.

Information Edge

Information or analysis that allows an investor to understand a company better or earlier than other market participants. Alternative data can potentially create an information edge.

Signal

Useful information within data that tells an investor something meaningful about a company. Example: rapidly accelerating customer spending could be a signal that revenue is stronger than expected.

Noise

Data or information that doesn't actually tell an investor anything meaningful. A major challenge in alternative data is separating useful signals from enormous amounts of noise.

Leading Indicator

A metric that changes before the financial result an investor ultimately cares about. For example, rising transaction activity could potentially indicate stronger revenue before the company reports earnings.

Lagging Indicator

A metric that confirms something after it has already happened. Quarterly financial statements often contain lagging information because investors receive them after the quarter has ended.

Catalyst

An event or development that could cause investors to change how they value a company and potentially move its stock price. Earnings reports, product launches, regulatory decisions, or major KPI changes can all be catalysts.

Inflection Point

A meaningful change in the direction or speed of a trend. For example, sales growth going from steadily slowing to suddenly accelerating could represent an inflection point.

KPI Inflection

A meaningful change in an important company metric. Investors want to identify KPI inflections before the broader market recognizes them.

Variant Perception

An investor's view about a company that differs meaningfully from what the market currently believes. If the investor's variant perception is correct, it can potentially generate alpha.

Mosaic Theory

The idea that investors can combine many separate pieces of legal, non-material information to develop an investment conclusion that isn't obvious from any single piece of information.

Material Nonpublic Information (MNPI)

Important information about a public company that has not been made public and could affect its stock price. Trading while possessing certain MNPI can be illegal, making compliance extremely important in investment research.

Due Diligence

The process of thoroughly investigating a company, investment, dataset, or business opportunity before making a decision.