Algorithms Can Predict Just About Anything — Even Stocks
Last week my friend asked me to watch a new Netflix show that she had glowing reviews about.
The show is Bridgerton, a romance set in the Regency era.
Now, this genre isn’t exactly my cup of tea. So, unsurprisingly, I wasn’t a fan of the show.
When I told my friend how much I hated it, she responded with, “At least TikTok understands me.”
On TikTok, a popular social media platform, she had made connections between the show and certain novels and movies.
And TikTok showed her videos from users who had the exact same opinion as her.
Even her most niche and specific ideas about the show were reflected on TikTok.
It was as impressive as it was creepy. So how did the app manage to do this?
Well, as TikTok users often put it, it’s all thanks to “the algorithm.”
TikTok Can Predict Exactly What You Want
When you first join TikTok and start scrolling through the videos, they seem random and uninteresting.
This is usually when the TikTok veterans tell you to just keep scrolling and trust the algorithm.
After a few days the app’s “For You” page starts to live up to its name.
It only shows curated content that’s unique to you.
It doesn’t matter if you’re into extremely specific things, like French-Korean fusion food or chimps that were raised by big cats. TikTok has videos for you.
The algorithm that users refer to is a machine learning tool called a recommendation engine.
When you first use the app, it shows you a set of eight popular videos — each related to a different topic or trend.
The algorithm then gauges your engagement and interaction with each video:
- Did you share it?
- Did you rewatch it?
- Did you follow the content creator?
- Did you save it to your favorites?
- How quickly did you scroll past it?
These are just a few data points the algorithm takes into consideration.
Based on this data, it comes up with another set of eight videos.
Over time this process predicts exactly the videos you want to see next.
And if your mood changes as you scroll, the algorithm can shift its predictions to match it.
Machine Learning Is Incredibly Effective
This algorithm is responsible for TikTok’s monthly active user count rising above 1 billion so rapidly.
(Source: Business of Apps.)
Now, TikTok isn’t the only one that uses machine learning.
All social media apps use some type of algorithm to keep you engaged on their platforms.
The global machine learning market is expected to grow 9X over the next seven years.
That’s because machine learning applications go beyond just social media apps.
If these algorithms are fed the right kinds of data, they can predict just about anything.
This makes it applicable to most fields, including investing.
This is exactly what Ian King and Steve Fernandez have been working on.
They managed to develop a strategy based on machine learning that can predict exactly when a stock is about to go up.
To learn more about this approach, check out Ian’s new presentation.
Research Analyst, Strategic Fortunes
From open till noon Eastern time.
Advent Technologies Holdings Inc. (Nasdaq: ADN) develops and manufactures hydrogen fuel cell systems and related critical components. The stock jumped an incredible 91% after the company signed a sales and development deal with Hyundai Motors to fulfill its fuel cell project needs.
Tufin Software Technologies Ltd. (NYSE: TUFN) develops, markets and sells software-based security and IT solutions. It is up 43% on the news that it is being acquired by Turn/River Capital, a software-focused investment firm, in an all-cash deal worth $570 million.
NextDecade Corp. (Nasdaq: NEXT) engages in the development of activities related to the liquefaction and sale of liquefied natural gas (LNG). It is up 15% after signing a 20-year purchase and sales agreement with ENN, a large Chinese energy company.
BioXcel Therapeutics Inc. (Nasdaq: BTAI) uses artificial intelligence approaches to develop medicines in neuroscience and immuno-oncology. The stock is up 14% after the FDA approved Igalmi, its candidate used to treat agitation associated with schizophrenia or bipolar disorder in adults.
Gogo Inc. (Nasdaq: GOGO) provides broadband connectivity services to the aviation industry. The stock is up 12% on the news that the company is set to join the S&P SmallCap 600 Index by the end of the week.
Newegg Commerce Inc. (Nasdaq: NEGG) operates as a tech-focused e-commerce company internationally. It has no news to report; rather, it is up 11% because it is a favorite of meme stock traders.
Tilray Brands Inc. (Nasdaq: TLRY) engages in the research, cultivation and production of medical cannabis products. It is up 10% after the company delivered stronger than expected earnings for the third quarter and announced a distribution deal with Whole Foods.
Nuvve Holding Corp. (Nasdaq: NVVE) is a green energy technology company that develops and commercializes vehicle-to-grid (V2G) technology. The stock is up 9% after the company received approval to participate in Japan’s energy market and provide ancillary power and stabilizing services to the power grid.
Gossamer Bio Inc. (Nasdaq: GOSS) discovers and develops therapeutics in the areas of immunology, inflammation and oncology. It is up 8% after analysts at UBS initiated coverage on the stock with a buy rating stating that it has near-term upside potential.
BigBear.ai Holdings, Inc. (NYSE: BBAI) provides analytics solutions to the defense, intelligence and commercial markets. It is up 7% today recovering from its drop last month following poor earnings news thanks to increased interest from meme stock traders.