Number of words: 683<\/p>\n\n\n\n
For as long as companies have hosted quarterly conference calls, analysts and journalists have tried to parse not just what a company\u2019s executives say, but how they say it. Software from Amenity Analytics promises to automate this process by spotting when chief executive officers try to duck tough questions. The software, its makers say, can even pick up on the signs of potential deception that CIA and FBI interrogators look for\u2014including stalling and the use of qualifiers\u2014and can gauge the sentiment of what is said on calls and reported in public filings, issuing a positive or negative numeric score. The goal is to make it easier for investors to wade through information and quickly make trading decisions.<\/p>\n\n\n\n
Amenity has just secured an additional $18 million in venture capital funding from investors that include former AIG CEO Maurice \u201cHank\u201d Greenberg as well as insurance company Allstate Corp. Existing backers include Intel Capital, the venture capital arm of the chipmaker, and Israeli venture capital firm State of Mind Ventures. Amenity had previously raised $7.6 million in 2017.<\/p>\n\n\n\n
Barclays Capital, in an October 2018 research report, concluded that using Amenity Analytics\u2019 software to examine earnings calls\u2014and using the sentiment score to decide whether to buy or sell short the shares of those companies\u2014produced an annual return 12.97 percent greater than a benchmark index. The Barclays researchers also found that Amenity\u2019s sentiment scoring, which is based on an understanding of words in context, was superior to a more common, cruder way of gauging sentiment that\u2019s based on looking at the words mentioned most frequently on a call. Stock research firm Evercore said in a November report that it successfully used Amenity\u2019s software to examine S&P 500 earnings calls for such macro trends as whether cyclical industries were more worried about a U.S.-China trade war and whether CEOs in aggregate thought the long bull market might be coming to an end.<\/p>\n\n\n\n
Storch, a former Wall Street analyst and portfolio manager, knew from experience the difficulty of sorting through the information available on thousands of publicly listed companies to try to find trading signals. He teamed up with Ronen Feldman, a professor at Hebrew University in Israel who\u2019s a leading expert in using software to extract meaning from text; together they formed Amenity Analytics in 2015. \u201cWe find all sorts of nuances in language,\u201d Storch says. That includes certain tells that indicate a person may be lying. \u201cStall tactics, redirects, evasive answers, the use of clich\u00e9s and jargon\u2014there is a whole taxonomy of factors that you can see,\u201d he says. Amenity\u2019s software can be used to further research any industry, but Storch and Feldman decided to start with stock research and insurance since they understood the need most clearly.<\/p>\n\n\n\n
Storch says the software works best when a user compares a call\u2019s overall sentiment score or the number of instances of apparent deception to the figures for prior calls, or benchmarks the data across an industry. After all, some CEOs are just more prone to using clich\u00e9s\u2014which could be a sign of evasion or might just be the way that CEO talks.<\/p>\n\n\n\n
Amenity has lots of competition, from International Business Machines Corp. and its Watson AI platform to Alphabet Inc.\u2019s Google, as well as from similar analysis systems built by some large banks. Amenity\u2019s software is used by ratings agency Moody\u2019s, the Nasdaq, and media giant TimeWarner, among others. When I tested the software on the transcript of the infamous Tesla quarterly earnings call from May 2018 in which Elon Musk berated an analyst for asking \u201cboring\u201d questions, the software scored the call as off-the-charts for \u201cdeception.\u201d Then again, analysts probably didn\u2019t need a piece of software to tell them that.<\/p>\n\n\n\n