How to Make Money in the Stock Market using Alexa.com: Amazon

Thursday, April 30, 2009

By Thoughtsworththinking.net

Ever think that if you were able to count all the customers who walked into a store that you might be able to do pretty well investing in its stock? Turns out that you can–sort of. Check out Alexa.com.

Alexa is an authoritative web site for Internet traffic ranking. You can go to Alexa and plug in the address of a site, and see how it ranks in comparison to the rest of the Web, and a whole lot more.

To give an example of how Alexa can be relevant to judging where a stock may go, take the case of Amazon.com, which reported earnings per share that were $.10 above Wall Street’s expectations on April 24. First, if you go into Alexa under “Pageviews,” a measure of the percentage of all Internet page views, the level for January through March of 2009 looks similar to the same period in 2008. When you account for the Web’s audience growing over the course of a year, the similarity of the two periods suggests that the actual page view rate for the 2009 first quarter may really be higher. However, the “Pageviews/user,” an indication of the number of pages on the site each visitor views, indicates a slight dip. A drop in page views per user could indicate that visitors are not looking at as many products, a negative sign. However, this dip is very small, perhaps not statistically significant enough to steer the analysis either way.

But take a look at the “Time on Site” graph, which indicates the average number of minutes a visitor spends on Amazon.com. Here there is a clear difference. In January through March of 2008, the line hovers near the 5 minute per user mark throughout the quarter. But in the first quarter of 2008, despite being in the midst of the financial crisis, the graph trends pretty steadily in the 6 minute range. The logical conclusion: people are on the site longer because they are buying.

Moreover, this trend was clearly distinguishable by the end of March, when the stock was trading in the $70-$75 range. It reached a high of $86.68 on April 24, the trading day that followed the earnings announcement.

To be certain, Alexa.com is just one tool in an investor’s toolbox for judging where a stock may go. But it’s a pretty intriguing one.

(Note: The author did not hold a position in Amazon.com as of the original publication date of this post.)

This entry was posted on Thursday, April 30th, 2009 at 8:16 pm and is filed under Stocks and Investments. You can follow any responses to this entry through the RSS 2.0 feed.

Nadine

May 2, 2009 at 4:24 pm

Hello,
Where are you from? Is it a secret?

#14

E*Trade | Thoughtsworththinking.net

May 4, 2009 at 3:00 am

[...] recalling my hypotheses that information on web traffic available on Alexa.com is a tool that can be used to analyze equities, the recent indications of traffic for E*Trade’s web page as reflected on Alexa are positive. [...]

#17

Thoughtsworththinking.net

May 4, 2009 at 3:22 am

See my About Thoughtsworththinking.net page.

#19

May 4, 2009 at 3:29 am

Not sure what happened on this pingback. Looks like a technical error.

#20

Viral Stash Financial News » E*Trade: Business Has Improved

June 29, 2009 at 5:00 am

[...] These events turn E*Trade into a largely macroeconomic play. E*Trade is clearly executing for reasons I have previously expressed in terms of operations and marketing—and has now shored up its financing to a degree that should allay exaggerated concerns of adverse action by regulating agencies. E*Trade’s brokerage revenue continues to be very favorable and—despite some indication of a mild summer slowdown—its current Alexa.com figures for website traffic continue to be strong. (See my post on How to Make Money in the Stock Market Using Alexa.com.) [...]

#48

TheTradingReport » Blog Archive » E*Trade: Business Has Improved

June 29, 2009 at 5:19 am

#49

Making Money In Stock Trends. | 7Wins.eu

July 21, 2009 at 7:44 am

[...] How to Make Money in the Stock Market using Alexa.com: Amazon | Thoughtsworththinking.net [...]

#80

Ning

October 7, 2009 at 10:41 pm

Hello,

I recently found your blog via SA and found your analysis always very insightful.

As to use Alexa as way to estimate e-Commerce website, I did a similar research before, but found that Alexa is not that accurate to gauge website traffic. Recently, I found Google trend, which gives contradicting trend to Amazon.com: http://trends.google.com/websites?q=amazon.com&date=all&geo=all&ctab=0&sort=0&sa=N. I thought that Google trend would be more accurate as most people in North America use it, while Alexa relies on pre-installed toolbar, which could introduce self-selection bias (mostly Internet savvy people, see middle section of Wiki link: http://en.wikipedia.org/wiki/Alexa_Internet )

Google also dedicates a research on predicting domestic trend via search: http://www.google.com/finance/domestic_trends, http://googleresearch.blogspot.com/2009/04/predicting-present-with-google-trends.html – this is by Hal Varian, then UC Berkeley Prof, now Google Chief Economist. I use Google trend to monitor some thesis I’m in. For example, I check GRMN’s popularity via this link, http://trends.google.com/trends?q=Garmin&ctab=0&geo=all&date=all&sort=0 as I have a short GRMN thesis.

Other tools, which I also use as reference, to monitor web trend are: http://www.quantcast.com/ , http://siteanalytics.compete.com

Hope this help.

Best,

#763

October 10, 2009 at 5:19 am

Ning: Very useful summary on e-commerce web site traffic resources. Thanks. Sorry for the delay in posting and reply–I get droves of spam messages that I need to wade through to find constructive comments like yours.

#772

October 23, 2009 at 3:23 am

Super. Glad you visited, Stock Market.

#820

October 28, 2009 at 6:01 pm

Thanks, Penny Stocks.

#849