Google Trends may be an interesting tool for investors.
- It allows investors to gather data on a company that’s fresher than the last quarter’s earnings release. This can be helpful in turnaround situations such as Aeropostale (ARO) and Cafepress (PRSS).
- Having leading earnings indicators can be helpful for manufacturing companies (e.g. RGR, SWHC) where there is not much data on consumer demand due to fluctuating inventory at the retail and distributor level.
- In rare cases where fraud is suspected, Google Trends may provide some indications about actual revenues.
Here is an example of Google Trends in action:
The lines on the chart are colour-coded to match particular years. This makes it easy to compare search interest from year to year.
To the left of the chart, there is a bar chart for the average interest for a particular year. Sometimes, this bar chart can be misleading if search interest follows seasonal fluctuations. In this case, Aeropostale has higher search interest during the Christmas shopping season as well as back-to-school.
Some interesting Google Trends
ARO: It seems that the turnaround is not working. For whatever reason, Aeropostale’s peers like ANF and AEO are also seeing their search interest and revenues decline.
PRSS: Cafepress is an interesting turnaround situation because the company’s founders have returned to fix the company. The stock is arguably cheap because the company has sold off assets for cash. However, the original core business seems like it may be faltering according to Google Trends. I need to do more work on this company.
Some gun manufacturers (RGR, SWHC) look like they will see a weak Q1 2015 in terms of ultimate demand from the consumer. VSTO‘s Savage Arms is bucking the trend. Savage Arm’s recent resurgence may (or may not) be due to its $100 cash rebates.
Pandora (P) is interesting because Google Trends is indicating a rapid decline in interest while the competing Spotify service has seen dramatic interest growth. Pandora’s SEC filings report high growth in revenues, active users, and listening hours. There is a very big disconnect. Because I have not done much work on Pandora, I do not know which set of numbers to believe. I have no position in Pandora.
Nimble Storage (NMBL) has a small disconnect between its Google Trends data and SEC financials. To be fair, its Google Trends data may be wildly inaccurate due to the small sample size.
Herbalife (HLF), Nu Skin (NUS), Coach (COH), and Lululemon (LULU) are some stocks in the headlines that have seen their search interest decline from last year.
Problems with Google Trends
- Search interest may not correlate with revenues. For example, one-time events at Lumber Liquidators (a 60 Minutes segment) and Lululemon (see-through yoga pants) have caused traffic spikes.
- The trend may not be accurate, for the same reasons as #1.
- Useless China data because Google search is banned in China.
- If a company has multiple brands and product lines, you may need to aggregate data for searches from all of those brands and product lines.
I would absolutely love to figure out a method of easily verifying a company’s revenues where fraud is suspected. Unfortunately, I don’t think that it can be easily done. For example, the Crazy Eddie fraud took steps to avoid detection. The company intentionally overpaid its taxes so that its numbers would not raise a red flag. I believe that other frauds can overpay credit card processing fees, contingent rents, etc. etc. They may also manufacture fake sales return data and other numbers reported in their 10-K that should track revenue. To detect inflated revenues, having independent data is incredibly useful. However, the problem with independent sources is that most of them are inaccurate.
US import/export data may be a good source of independent data. However, I have not figured out a way to extract accurate data on the volume of goods imported by a particular company (without paying for a commercial service).
Google Trends can sometimes be inaccurate. Other sources of web traffic data like Alexa, Compete.com, etc. can be even more inaccurate due to various problems with:
- Demographics (those who install the Alexa toolbar are a weird demographic of webmasters and people who install spyware)
- Sample sizes (low # of Alexa toolbars installed).
So far, it seems that Google Trends is the least inaccurate source of independent data to verify a company’s revenues.
Google Trends can also look at interest in particular countries. For example, Michael Kors has growing interest worldwide. However, its American search interest is roughly flat.
This might indicate that Michael Kors is close to saturating the American market (or may not be performing as well in the US).
(*I am long KORS.)
Appendix: a collection of some Google Trends results
- Coach (COH) is seeing a big decline in interest. (*I am short.)
- Michael Kors (KORS) has slowed down and is growing only slightly. (*I am long.)
- Vera Bradley (VRA) is in decline.
- Sturm Ruger (RGR) is seeing slightly less interest than last year. (*I am long.)
- Smith & Wesson (SWHC) is seeing slightly less interest than last year.
- Savage Arms (one of VSTO’s brands) is seeing a resurgence in interest.
- Cabela’s (CAB), a retailer of outdoor goods including guns, is seeing softer interest since 2013.
- Herbalife (HLF) interest peaked in 2014 and is now tracking 2013 levels.
- Nu Skin (NUS) peaked in 2013 and is now slowly declining.
- Michael Kors (KORS) is still growing interest but the growth is slowing down. (*I am long.)
- Fossil (FOSL) is holding steady. (*I am long.)
- Lululemon (LULU) is slowing down slightly.
- Under Armor (UA) continues to grow.
- PacSun (PSUN) is seeing a very small decline since interest peaked in 2013. (*I am short.)
- Aeropostale (ARO) continues to decline.
- Abercrombie & Fitch (ANF) and Hollister are in decline.
- American Eagle (AEO) is in decline.
Post production software
- Avid (AVID) and its major audio product Pro Tools are in decline. (*I am short.)
- Its competitor Final Cut Pro (an immaterial part of AAPL) is in decline.
- Adobe Premiere Pro (owned by ADBE) is slowly growing.
- Blackmagic Design (makes video cameras and post production software and hardware) has seen its popularity reverse.
- Restoration Hardware (RH) plateaued in 2012/2013 and is in decline. This is inconsistent with RH’s 20%+ revenue growth. (*I am short.)
- West Elm (owned by WSM) has seen its interest reverse and decline slightly. This is surprising given West Elm’s rapid store count growth (19%) and comparable store sales (+18%). West Elm grew revenues 26% while RH grew revenues 20.4% so one might expect both retail chains to have similar Google Trends interest.
- Williams Sonoma (owned by WSM) shows rapid decline. WSM has closed Williams Sonoma stores at a very slow rate (-2%). Pottery Barn is also in decline. It has been opening more stores at a very slow rate (2.6%).
- Conn’s (CONN) has been growing. Currently its growth has stopped and the current year’s interest is tracking last year’s. (*I am short.)
- Rent-A-Center (RCII) has seen slight growth.
- Aaron’s (AAN) is mostly flat.
- Tile Shop (TTS) is slowly growing. (*I am not short for reasons explained in this post.)
- Gamestop (GME) continues its slow decline. (*No position. I have been short GME in the past.)
- Tractor Supply (TSCO) continues to become even more popular. It looks like the company is continuing its momentum despite the change in CEO.
- Ross Stores (ROST) is trending slightly higher than last year.
- TJ Maxx (TJX) is gaining popularity faster than ROST. Note that TJX has multiple brands.
- IBM is in a decline.
- EMC has seen a very, very small decline.
- NetApp (NTAP) is declining slowly.
- Dot Hill (HILL) has seen its interest grow. (*Unfortunately I am short and this may be a position I may close.)
- Violin Memory (VMEM) peaked in 2013 and is now in decline. (*I have shorted VMEM in the past. No position.)
- Nimble Storage (NMBL) has declined slightly year-over-year though it has grown over the past few years. It may or may not be slowing down. This seems to be inconsistent with Nimble’s astronomical revenue growth. Small sample sizes may be causing inaccuracy in the Google Trends data for Nimble and Violin.
Malone complex – music
- Sirius XM (SIRI) has slightly increasing interest though 2015 interest may be flat. Sirius XM’s SEC filings report growing revenues. (*I am long LMCA.)
- Pandora (P) shows declining interest for the search phrase “Pandora radio”. This is very weird because Pandora’s revenues, users, and hours listened are growing.
- Spotify, a Pandora and Sirius XM competitor, shows rapid growth.
- Live Nation (LYV) interest is in decline despite increasing revenue growth. (I’d point out that fans may be more interested in particular artists’ concerts than Live Nation the company.) Live Nation might not be doing a good job with its website and social initiatives. Ticketmaster also has declining interest.
Malone complex – video content
- QVC (QVCA/B) interest is in a slow decline.
- Starz (STRZA/B) interest is mixed.
- Discovery Channel (DISCA/B/K) has declining interest.
- Netflix (NFLX) continues to rapidly grow.
- Amazon Instant Video continues to rapidly grow.
- The popularity of Youtube has been extremely high in the past few years. It may be down very slightly from the previous year.
- has been declining since 2008/2009. This is a head scratcher. I would note that search interest in
- peaked in 2009.
- Leapfrog (LF) is in decline.
- OUTR’s Redbox brand is declining. Coinstar has mixed interest. EcoATM does not have a lot of search volume.
- KING’s original flagship game Candy Crush Saga is quickly declining.
- GLUU’s Farmville continues to decline.
EDIT (6/10/2015): One example of Google Trends tracking poorly with revenue is the online game World of Warcraft (publicly-traded ATVI owns a stake in the game). Various websites such as this one summarize WoW subscriptions. Here is the Google Trends for WoW.