Howard Reisman Tradestreaming Interview

Listen to Stock Rover CEO Howard Reisman in a Tradestreaming interview about the company. This audio describes the genesis of Stock Rover.

Zach Miller (Intro): Welcome to Tradestreaming radio, I’m your host Zach Miller. This is the place where investors come to get tools, tips, and technologies to help you make better, smarter investment decisions. Today’s guest on the program is Howard Reisman, he’s the founder of a new product called Stock Rover. Stock Rover launched earlier in 2012 to a lot of good press, you may have read about it in Barron’s. It is a really powerful equity research tool, it brings institutional-grade analytics to individual investors. It was created by Howard to fit his own personal needs, so it’s sort of an individual investor tool made by individual investors. It’s a really powerful tool. Howard is a long-time software industry professional and he has transitioned over the past couple years, with Stock Rover, into the finance space, so we talk a little bit about that in our interview. Thanks for joining us, I hope you’ll find Stock Rover, as well as this program very useful for you. You can find the archives of this program on my website www.tradestreaming.com, you can also find the archives on iTunes, as well as on Stitcher radio. Thank you for joining us, and we look forward to talking to you soon.

 

Zach Miller: Can you tell me who you are and what you do?

Howard Reisman: Sure, my name’s Howard Reisman, I’m the CEO of Stock Rover. We’ve just released our product in March this year in beta form, www.stockrover.com, that’s a website designed for investors to really be able to look at data in a much more efficient way to be able to make better investment decisions.

Miller: Was this a personal itch you were scratching, when you developed Stock Rover?

Reisman: Yeah, absolutely. The genesis of this really came…I mean, I’ve worked in software all my life, I’m a software engineer, I’ve designed a lot of enterprise-class software systems and programs and basically, on the side, I like to invest, and I used the usual tools to invest: Yahoo Finance, Google, a number of the websites available from brokerage houses, just kind of a hodge podge of investing and you know I’ve done reasonably well and was OK with it. But then when I started to get more serious about it, and this was around 2008 say—not a great time, I guess, timing-wise, but it was actually a pretty critical time to make good decisions—I really started to feel that a lot of the tools were very difficult to use, that the investing process was inefficient, not repeatable, every website opened up a separate page and you were just shown a lot of random data, depending on the format of the page, and it just seemed difficult. So being a software engineer, I was working with another guy, Andrew Martin, who’s actually a co-founder of the company, along with myself, on our main business which is enterprise-class software for system management, and on the side we started to do a little skunk works project to help our investing where we started just pulling data off the internet, putting it into a big SQL database, and started running queries on it to try to really see what was going on with a lot of companies independent of either the hype of analysts, or the difficulty of just comparing companies. You could kind of read about one company in-depth, say Microsoft, but if you wanted to compare it across a number of different metrics against many of its peers it was a much more manual process. So we developed this kind of web-scraping database app that basically dumped data into Excel and did all sorts of pretty sorts with it. And it was actually quite helpful, I won’t say I avoided all the pain of 2008 but I avoided a lot of it because we saw some stuff that would’ve been harder to see otherwise. So we started talking and thinking that maybe this is something that would be very useful for individual investors like ourselves.

Miller: So can you define that prospect? You know you sound like a very savvy investor yourself—who’s the target user?

Reisman: The target is someone who fundamentally who has money that likes to make their own investment choices. So that would be pretty much anyone with a brokerage account, Fidelity, Ameritrade, etc. that just likes to make their own decisions. Now there are high net-worth individuals who have managed accounts that probably wouldn’t be a target but basically people that ultimately are making investment decisions, which are typically individual investors, but also we’ve found with the tool, which I’m sure we’ll get into later in the interview, that a number of our users are professional investors as well. Basically people that really like to invest their money, control their money, and select stocks, and mutual funds and ETFs and the like.

Miller: Does it cater to a more fundamental strategy? People that are doing fundamental research?

Reisman: That was the original goal of the product—long-term fundamental research, but I’ve learned over the years that technicals matter, and that people that like to trade technicals that might be making shorter-term trading decisions—the site fully supports that. I would say what we don’t support is the day-trader, you know people that are in and out of stocks very, very quickly, I think that is not the strength of our tool. But if you are kind of making a fundamental decision that you like this stock, we provide excellent technicals in the charting tool to decide if this is the right time, or maybe a better strategy might be to observe it and buy it a bit later, something like that.

Miller: Are there any social capabilities built in? Meaning can I save screens that I’ve done myself and then share them with other users? Are you building a network effect to that extent?

Reisman: That’s a great question. The short answer is right now the social capabilities are fairly minimal. You can share portfolios, or screens, or watchlists with other investors on Stock Rover by exporting your stuff and importing it, but you’d have to do that through email. It’s really barebones sharing, but on our roadmap I think sharing is an absolutely critical piece of the product, and I think you’ll see over the course of the next year or so a tremendous amount of emphasis on building a community where people can easily share their stocks, their ideas, their portfolios, and using Stock Rover as the underlying infrastructure to do that.

Miller: So I love the fact that Stock Rover evolved out of your own personal need to invest so it really solves a problem that you were very familiar with. There are a few other tools in the space, you know, maybe not as robust or as broad. If you were talking to a PR person how would you say that Stock Rover is differentiated from some of those other tools?

Reisman: That’s a really good question. I think the main differentiation is first of all the web 2.0 interface. It’s a website, but it really feels like an app, with right-clicking, it’s very easy to drag and drop and to change things around. One of the models we used which is quite different is, as software developers we’re used to using something called an IDE, which is Integrated Development Environment, where basically all your panels are fixed, and what happens is that the data in the panels change. The nice thing about that is you’re not dealing with window management, lots of windows, different formats, so we basically have a fixed five-panel format, which allows you to look at a lot of different data very efficiently, and as you just click and change things around, things change, so it’s quite fast and efficient for research. So I’d say the breadth, depth, and quality of the UI experience is a big differentiator.

But I think the biggest differentiator probably is just the ability to compare. I mean basically one of the main panels is the Table, which allows you to basically pick anything, any stock, ticker, and any set of columns, in other words any metrics you want which might be financial metrics such as operating margin, or price or earnings, whatever you care about, or price metrics such as percentage close to 52-week high, there’s just over 250 of them. We provide a predefined set of Views that we think are pretty efficient, but a user can create their own sets of Views so, just to pick a simple example, if they pick three tech stocks they might be interested in, AAPL, MSFT, and CSCO, they could put those three in the Table, they could put a View up, they could see their price performance, they could see their operating margin performance, they can just switch around the Views and very easily compare them in a spreadsheet format. I think the ability to really compare is really the strength of the product.

Miller: That’s really interesting. So give you launched in—what month, you said?

Reisman: We launched in March and we really have not done much in the way of PR, it’s still in beta but it’s coming out of beta real soon.

Miller: You got some great initial PR wins, I saw you mentioned in Barron’s.

Reisman: Yeah we got a great article in Barron’s, we got a nice write-up in AAII, we’ve gotten some small write-ups…so our community has built to multi-thousands, which is great, and I mean we didn’t expect that.

Miller: So that was a lead-in to my question: you know you built something that sort of mirrored your own usage—any surprises once you launched and started watching user activity? How are people using Stock Rover?

Reisman: That’s a great question, there were multiple surprises. The first surprise, and I’d say the biggest surprise, and the biggest change from the roadmap—you asked me about sharing, sharing was huge in our roadmap, that was the next thing we were going to do, but that actually became the second next thing we were going to do because, well, the first thing we learned is that we are using Morningstar data, primarily, for the research, and Morningstar has excellent data. So the basic theory of the tool was basically to be able to price, or you could put a ticker in for any of the 8,000 stocks that we provided detailed research information on. So if it was something we didn’t provide research information on, maybe a thinly traded stock, maybe a closed-end fund, maybe a preferred share, something like that, we didn’t recognize the ticker. And the first thing we saw immediately was that people were putting in a lot of tickers that there really isn’t a lot of research for, I mean that people don’t really know a lot about. But our users wanted us to price those tickers even though we weren’t providing research, and our original model was just to price things we provided research for. So that was a huge change for us, so that really defined…

Miller: So what’s going on there? That’s like the long-tail demand for thinly-traded stocks?

Reisman: What we found was that people want to maintain their portfolios on the tool, and within their portfolios, they’ll tend to own all the mainstream stuff, and then a number of the users have one or two outliers. There might be somebody that’s into closed-end funds, there might be somebody that may be really small cap, a lot of foreign stocks, you know stocks that are not traded on North American exchanges people wanted priced, so that really surprised us actually. And we realized we needed to price everything that people owned, regardless of whether we provided research information on it or not. What we can provide for the stocks is pricing information that shows how it’s performed over time, but for a lot of them we can’t tell you much more than that, but people don’t care about that, they just want to get a price, so that was a huge surprise.

Miller: Interesting. So Howard here’s a personal question: you have an extensive history, you founded a company 30 years ago in the software space, you’ve been running that…obviously you have a very vibrant interest in finance, but why make a business out of it? I look at finance as this sort of monolithic industry, maybe I know too much, but it’s very interesting that you chose to make this like a second career for you.

Reisman: It is interesting, I would say certainly there was no plan, it was something that was backed into. I think my career, which has really been in high-end enterprise-class system management software, I’ve been doing it for so long that I feel I’ve exhausted the space as far as personal challenge goes. Finance, while I know my personal investment experience—as far as the types of experience you have, Zach—I don’t have. And that was kind of exciting to me, to get into something that I didn’t know anything about. Shifting sands, where I just was in an environment that was really new and different and I wanted the challenge, and so I think it really was more the choice of personal challenge at this point in my life.

Miller: That’s a great story, because what I’m seeing at least in a lot of the participants in this show itself, we’re seeing as many people come from within finance as from without. I know you’re based up in Boston, but there’s a whole slew of new companies on the west coast, and that traditionally wasn’t the case in finance; you were either in the epicenter of the world, which was New York, or you weren’t. And now we’re starting to see people come from other industries, and I think it’s a duel-edged sword. But people are coming with very vast experiences in other industries and they’re injecting a lot of creativity and movement in the space.

Reisman: I agree, I definitely have noted what you’ve noted, and I think that a far as our personal story, I think that we felt in general that investors were being underserved by the large finance sites. And they all really did the same thing and investors already have enough disadvantages compared to institutional investors that they really needed to get better data to be able to compare and make decisions. I think one of the advantages that we brought coming from a different world was a huge focus on user usability and the user interface, which I don’t think a lot of the financial sites have done. A lot of the sites just kind of throw the format up there and they provide the data and it’s kind of your problem to absorb it efficiently. We paid a lot of attention to how quickly you can see something and absorb something, because we want investors to be efficient, we also want the process to be enjoyable as opposed to a root canal, I think a lot of times when you invest, and when you do research for investments, the process can be pretty unpleasant, actually, just because of the complexity of it. We wanted to make it a much more enjoyable experience. So by paying a lot of attention to human factors and user interface and how people absorb information, I think that that’s a perspective we brought in that most people that are in the financial world don’t really think that way. I do think it’s good that there are people flowing in from other places in order to stir the pot, I think it’s great.

Miller: That’s a great answer. So you’ve got Stock Rover, it’s got an incredibly powerful stock screener, it’s broad, it’s deep, it’s also free, which is awesome. What’s the business model? Is there a business model?

Reisman: There is a business model, the current business model is “lose money.” I mean obviously, because it’s free, but the goal is to transition it to a subscription tool, and we told our users that, we told them that right from the get-go. The subscription price is going to be reasonable, because we want investors to not to view that as an impediment to making good investment decisions. Some sites can be pretty expensive, we don’t want to be expensive, we want to have as many people use it as possible. So there will really be two components to it: there will always be a free component to it, so you will be able to use the site for free, but there will obviously be a delineation of capabilities in the product, and some of the more advanced capabilities will certainly be subscription-based, and the others will remain free. I mean the goal would clearly be to get people to use the tool and have free users, as they use it over time, recognize the value, and hopefully as it becomes a part of their own investment experience, at some point some of them convert to subscription, I mean that’s the basic model.

Miller: The freemium model.

Howard: The freemium model, but I think with more of a focus on really trying to get people to subscription. The free tool will be fine, but I think that if you’re going to do serious investing you’d want to subscribe.

Miller: So you mention this move towards a premium model, you mentioned some type of social capabilities, are there other things in the roadmap that you could share with us that users could look out for?

Reisman: Sure, the first big thing for us is expanding the investment world, because right now we’re supporting 8,000 tickers, but we’re coming out with a release this month that will support 45,000 tickers, which I think is going to cover pretty much everything. And it also has this kind of cool ability where if you put in a ticker that we don’t recognize we’ll go and try to figure out what it is, give you some options, you’ll tell us what it is, and if it’s something we can price, we’ll dynamically add it to the database. Because we realize that even with 45,000 there’s going to be some stuff out there that we’ve never seen before that somebody might add. So that’s kind of a cool thing. After that I think we really want to get more into the portfolio side, right now the focus of the tool has been on intelligent allocation of capital, making good investment decisions, and we do a nice job of portfolio tracking, but we don’t track trades, and I think tracking trades is pretty important, so I think that after we get the ticker piece out, you’ll see a bigger emphasis on portfolio management where we’re actually tracking trades, grading trades, giving a lot of portfolio analytics, so people will know how they’re really doing, so they can look back and see their five best trades, five worst trades, they can basically start to get an unbiased real history of what they’re decision making’s been so they can critique it and become smarter investors. I certainly know in my own investing experience I anecdotally thing “this that, this that” and say “oh yeah, this is the way to go” but then if I actually sit down, take the trouble to walk through the data, I sometimes learn things that are quite surprising. A quick example: I had a couple of years when I did extremely well, and I was patting myself on the back, and going “boy I’m such a great stock picker” and then I did an analysis of what really happened, and it turned out that what I had done intelligently was that I had overloaded, I guess you could say luckily, two sectors that turned out to be the right sectors to overload. The stock picks within the sector didn’t actually matter that much, that I’d actually had a weighted portfolio that was very sector-biased, and I’d picked undervalued sectors that then later performed really well, and almost all the outperformance came from the sector picks, not the stock picks. That was eye-opening. The goal we want to have is to give people more analytic data in an easy-to-use format so they can see what’s really happening and become better investors.

Miller: So to that end I guess one nosy question: I saw the name of your company is Stock Rover—are you going to move into asset management as well, using this tool?

Reisman: Probably not, at this point in time there are no plans for it. I mean the roadmap at this point in time is just to become a stronger tool for investors to use so I think you’ll certainly see the capabilities we’ve talked about, we want the ability to run it on an iPad, which it doesn’t, or tablets, the social piece is definitely going to come in, the portfolio management piece. I think after that—you know our users are probably going to tell us which direction to go, but I think one thing at this point we don’t want to do is handle money, because it’s just not the direction right now, but that could change, but at this point in time we don’t think so.

Miller: One question I ask everybody, and we can end on this, and you already alluded to this in the course of our conversation, so Stock Rover’s an awesome tool, go check it out, it’s this broad, deep, very powerful tool, you can read some of the accolades also that Barron’s lauded on you guys…what other tools do you use in your own research? You mentioned Yahoo Finance, Google Finance, are there other tools out there that you find yourself going back to that you might want to mention?

Reisman: That’s a good question, let me think, what do I use…I use Morningstar, for one, I like their analyst reports. I have a subscription, even though we use Morningstar data and we have a licensing agreement with them, I actually as an individual have an agreement with Morningstar and use their data, I like their write-ups…a good example is week I used Stock Rover heavily, I have a new strategy I’m trying to run, and I used Stock Rover to find about fifteen stocks that I thought would be real good candidates, of which I was going to invest in about eight of them. So not being familiar with the companies and having a subscription to Morningstar, I used their features to get a lot of background of the companies so I could understand them better. On my brokerage sites, I have account with Fidelity and in particular Schwab is my main one. I do use some of the research, like the Credit Suisse, and people like that, again for analyst write-ups. So I tend to use Stock Rover for the quant side and I tend to use some of the other sites to find write-ups on the stock, sometimes Motley Fool has some good write-ups, I’ll use them. As far as other sites that do quant stuff that we don’t do, I’ll actually use Yahoo Finance, for example one thing they do which I use—I do dividend investing so I like the historical pricing, particularly showing all the dividends so I can see what the dividend stream looks like. We have dividend metrics, but they more summarize, but sometimes I like to see the individual dividend payment stream so Yahoo Finance is the primary thing I use if I don’t use Stock Rover, not providing a qualitative analytical data by analysts.

Miller: Howard Reisman, founder and CEO of Stock Rover, thanks so much for being on Tradestreaming radio today.

Reisman: It’s been a pleasure Zach, I’ve really enjoyed it.