Understanding investor sentiment: Why online engagement is a positive indicator.

In the age of digital communication, investors are increasingly turning to online forums to discuss their views, share insights, and engage with companies they are interested in. These platforms have become valuable tools for gauging sentiment, offering companies a window into the minds of their investors. But what does this online engagement really tell us?

We recently used AI to analyse the sentiment of 1,019 investors engaging online, aiming to understand the relationship between investor sentiment and their online activity. The AI categorised the sentiment into four distinct groups: "buy" (positive sentiment), "sell" (negative sentiment), "hold" (neutral sentiment), and "none" (neutral but without a clear position). Additionally, there were some interactions the AI could not accurately interpret, categorised as "blank". The results were insightful:

• Buy: 47%
• Hold: 24%
• None: 19%
• Sell: 3%
• Blank: 8%

The power of engagement.

The data shows that nearly half of the authors expressed a positive sentiment ("buy"), while only 3% indicated a negative sentiment ("sell"). This suggests that when investors are engaging online, they are generally more optimistic about the company.

In fact, this optimism may be tied directly to their level of conviction. Investors who are confident in a company's future prospects are more likely to take the time to participate in discussions, share their views, and keep up with the latest developments. On the other hand, those with low conviction are not only less likely to contribute to online discussions, but they are also more likely to remain silent altogether—hence the significantly lower "sell" sentiment and the small "blank" category.

Sentiment as a measure of conviction.

What does this mean for companies? Simply put, if investors are taking the time to engage with your company online, it is most likely a good thing. Engagement can be seen as an indicator of conviction. Investors who believe in the company's long-term potential are more likely to voice their support, whether by endorsing a "buy" sentiment or, at the very least, by maintaining a neutral stance ("hold" or "none").

Conversely, those with a negative outlook either form a small minority or choose not to engage at all. This lack of negative sentiment online could indicate that investors with low conviction may not be actively participating in discussions, further reinforcing the idea that active engagement is a sign of positive sentiment.

Conclusion: Embrace engagement.

For companies, understanding and encouraging online engagement can be a powerful tool. It’s not just about having a presence on these platforms, but about recognising that those who are most engaged are often those who are most invested in the company’s success. While it’s important to remain aware of all types of feedback, the data suggests that positive engagement is a strong indicator of investor confidence and conviction.

In this digital age, where voices can be easily amplified, paying attention to online sentiment could offer valuable insights into how your most committed investors perceive your company—and how you might continue to build on that foundation of trust.