“Unlocking Investment Opportunities: Perpetual Harnesses AI to Boost Stock Selection”

Investor uses AI to help crack winning stock code

Using artificial intelligence to enhance stock selection

An equities portfolio manager at one of Australia’s leading asset managers is utilizing artificial intelligence (AI) to uncover winning stocks, save time, and potentially outperform the market. Thomas Rice, along with his research team at Perpetual, has developed a program powered by ChatGPT, which assists in accelerating their learning and processing information on thousands of companies for the Perpetual Global Innovation Share Fund.

A key challenge for Mr. Rice and his team is information management. With the vast amount of data available, it becomes increasingly difficult to identify relevant information from the noise. Mr. Rice explains that while he can manually sort through news headlines for a single stock, it is impossible to do so for thousands of companies. However, with the assistance of ChatGPT, a large language model, he can obtain semantic understanding and narrow down the headlines that matter.

Advantages of AI in stock selection

Mr. Rice and his team are not only using ChatGPT to filter news headlines but also leveraging AI to assimilate information on companies in various other ways. They can feed call transcripts to ChatGPT and quickly extract the main concerns raised by analysts, enabling them to gain a snapshot of the company’s performance. By speeding up this process, Mr. Rice believes they can analyze more earnings calls and extract additional value and insights.

Since its launch last November, ChatGPT has brought about discussions on whether it can be utilized to beat the market or even create a trading system that guarantees profits. Although Mr. Rice recognizes ChatGPT’s potential for enhancing stock selection processes, he emphasizes that it cannot replace the analysis and stock picking activities performed by investors. Rather, it can aid in speeding up existing processes and provide valuable critiques or alternative perspectives.

Mr. Rice suggests that even individual investors can leverage AI technologies to test their investment ideas and save time. By inputting an investment thesis into ChatGPT and requesting a critique, identifying risks, or writing a counter-argument, investors can gain additional insights and refine their decision-making process.

Caution and the human element

While AI technologies can undoubtedly enhance investment practices, it is essential to remember that they are only as effective as the underlying investment strategies and analysis. Mr. Rice highlights the importance of having a strong foundation in terms of investment criteria and understanding what constitutes compelling value.

Furthermore, the use of AI should not completely replace the role of human analysts and researchers. Perpetual‘s research team remains robust, and although they have the capability to utilize AI for various tasks, they still rely on their expertise and knowledge to make informed investment decisions.

Conclusion

Utilizing AI technologies, such as ChatGPT, can provide valuable assistance to investors, helping them streamline processes and gain additional insights. However, it is crucial to approach AI as a tool rather than a substitute for human expertise and judgement. Investors should invest time and effort into developing their investment strategies and understanding the fundamentals of sound investment decision-making, while utilizing AI to augment and validate their ideas.