Ari Weinberg

The Wisdom of Twits

Always be wary of financial advice given for free.

Take this lesson to heart and then dig in to StockTwits, a start-up stock-talk site built on Twitter streams.

The site filters Twitter messages using stock ticker symbols (annotated: $IBM or $MCD) or general market commentary including a “$$.” In order for your posts to show up on the site, you must follow @stocktwits on Twitter.

To the unfamiliar, the StockTwits stream is full of stock touts often associated with Yahoo Message Boards or faded sites like Raging Bull or Silicon Investor (all three shadows of their tech-bubble selves.) But the beauty of StockTwits, for a trader, investor or even casual browser, lies in the ability to find new voices and information on macro-economic trends, sector news and individual stocks all in one place.

True, a quick glance at StockTwits will feature a fair share of rooting – “Go $AIG Go” – when a large stock is running, but as with any new product you have to take some time to learn to use it.

“You have to have a filter,” said Howard Lindzon, the Internet entrepreneur behind StockTwits and, formerly, WallStrip. Lindzon stresses that StockTwits is first and foremost a community and not a stock-tip platform. “It offers social leverage, but also requires collaboration and tolerance.”

And while StockTwits is open for everyone to read, what messages make it through to the official site is discriminated. “There’s no such thing as a truly open community,” says Lindzon.

To keep out spammers and marketers, Lindzon and his team filter what the StockTwits audience sees. (Want the unfiltered version? Just do a Twitter search for your favorite stock and compare the results to the StockTwits search.)

StockTwits is definitely populated with its share of day traders, both momentum folks and technical geeks. There are even options pros. There are few actual professional money managers due to regulatory restrictions and disclosure rules, so you’re not going to get a big stock tip from Fidelity here.

At StockTwits, a casual investor, even someone like myself who generally holds mutual funds, can find macro and sector opinions from informed stock bloggers. They may not (and should not) turn you to the risky side of stock trading, but they can give you quick, real time, insight into business and financial moves that could impact your own work, purchasing or well being.

Chasing stocks is often a rube’s game. The pros have much more money and risk tolerance and will take the casual trader for a ride.

And, increasingly, the pros aren’t even people. The stock markets are being overtaken by Matrix-like supercomputers. So, if you are even considering taking your chances, you need any edge you can get. One blogger and frequent StockTwit poster Todd Sullivan – who runs ValuePlays.net – keeps a running commentary on a book of “value” stocks.

Berkshire Hathaway’s Warren Buffett, the most famous living value investor, likes to buy beaten up companies and coax them back to health over a longer period of time. This is his “value play,” in direct contrast to the profit-yesterday mentality of stock trading.

“Computers don’t make value assessments,” says Jim Gobetz, a Philadelphia-based money manager. Given the number of computers simply trading this market by rote, eventually they are going to get some wrong.

Wouldn’t it be nice to know when? Perhaps you could read about it on StockTwits.

You can also download the company’s StockTwits Desktop application for an integrated experience. Below are a few active (and wise) posters to StockTwits:

@abnormalreturns: Private investor Tadas Viskanta offers his take on financial news.

@GregorMacdonald: An energy investor who offers a macroeconomic perspective.

@marketfolly: A long/short hedge fund analyst’s take.

@toddsullivan: One of the more active value investors on the network.

@aiki14: Money manager Jim Gobetz on U.S. economic news.

Originally published at FiLife.