Here’s How To Use ChatGPT To Analyse A Stock
Let’s discuss the artificial-intelligence chatbot ChatGPT. ChatGPT is extraordinary, but its responses are algorithmic.
ChatGPT as such shows huge promise but my experience of it to date is that it has limited current utility in instances where recent data is required. This because ChatGPT does not use realtime information, it retrieves its data from OpenAI’s massive database (data up to 2021 and not including 2021). I can see huge utility if it were in fact connected to realtime information.
Here are some handy tips from analyst Reda Farran, CFA
6 ways to use ChatGPT to analyse a stock:
1) Ask ChatGPT to explain the #businessmodel of a company and ask follow-up questions. Ask not just “what” but also “how”.
2) Ask ChatGPT to perform a #SWOT analysis. Use that as a starting point and don’t hesitate to drill down into the details.
3) Ask ChatGPT to summarize a company’s #earningsreport calls. Add the link in the prompt and ask for the top 10 key takeaways.
4) Ask ChatGPT to evaluate a company’s #ESG credentials. But don’t forget to double check the information.
5) Ask ChatGPT to generate #code to backtest buy and sell signals. From testing the performance of different technical indicators to analysing past patters, ChatGPT can allow you to quickly test your hypothesis.
6) Ask ChatGPT to identify key #risks to your investment. Again, you might want to ask “how” and dig deeper into the details.
Now, here are some caveats (IMHO):
ChatGPT won’t allow you to uncover hidden gems. It won’t allow you to generate alpha directly. You won’t become a superstar analyst just by using it.
BUT it does allow you to aggregate information extremely quickly, which will not only allow you to explore more #ideas (you’ll get a first, big-picture idea more quickly, which will allow you to then decide whether it’s worth pursuing or not) but also to spend less time on google, and more time thinking about the #implications of what you read.
So use ChatGPT as a starting point, but don’t expect it to write your investment thesis. A well-informed and critical mindset is still required for that.
In fact, it is just becoming more valuable than ever.
ChatGPT is like a calculator > If you type stupid stuff in, you get stupid stuff out. On top of this, ChatGPT is SOMETIMES WRONG, I have found, on even basic things…
My Take
Remember, ChatGPT cannot analyse anything. It is not in its algorithms to do so. It just makes up strings of words.
Points 1 to 6 are interesting. It basically speeds up the analysis that people will have to do manually across multiple websites and resources.
1) Business models change over the years.
2) Swots change as well.
3) Earnings reports will definitely be outdated.
4) ESG analysis might work but again old data.
5) This is an interesting one, asking chatgpt to help generate code to better analyse performance.
6) Won’t work with old data.
What it does not avoid, however, and may, in fact, speed up due to the massive decrease in analysis time, is people ending up in the catching a falling knife scenario.
Ultimately, a stock is just a piece of paper and is worth what someone is willing to pay for it, regardless of ChatGPT’s analysis and your opinion of the analysis.
If a stock is dropping, it will only continue dropping and vice versa.
Where AI will also negatively impact an investor’s ROI is the discretion needed to pick stocks based on past performance.
There is nothing more powerful than the human brain for this. However, the brain is a muscle and needs training which people often fail to do and are now looking at AI to compensate.
The best combo is to use tech to do the boring stuff but you the human to shortlist the best stocks and manage a portfolio.
Don’t give up on yourself so quickly.
Chat GPT is not really there to do your research, you need to do your research and then feed AI with prompts to get the desiring output. Also, they are still in their early stages.
