A Peek at Trucking Data, and Then the Stock Surged; Glimpses of Key Figures Can Aid Investors in Truck Stocks, Soybeans, Bed Makers and Others

July 11, 2013, 11:34 p.m. ET

A Peek at Trucking Data, and Then the Stock Surged

Glimpses of Key Figures Can Aid Investors in Truck Stocks, Soybeans, Bed Makers and Others

MICHAEL ROTHFELD, JOHN CARREYROU and BRODY MULLINS

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Just before the stock market closed March 4, an industry-research firm emailed a monthly report on commercial-truck orders to hedge funds and other subscribers that pay the group $1,700 a year for the exclusive service. The early peek was worth the expense. The next day, after the bullish truck numbers were reported in the media, shares in truck makers surged, generating a tidy profit for investors who traded on the report in the late moments of the previous session. Even as federal, state and congressional investigators examine the preferential release to investors of broad economic data—such as the University of Michigan consumer-sentiment survey—some investors tap numerous other more narrowly focused and less well-known industry indicators ahead of the rest of the investing public.The activity is widespread and legal. Federal securities law doesn’t prevent investors from trading based on nonpublic information they have legally bought from other private entities.

Investment firms can pay anywhere from a few hundred to many thousands of dollars a year for access to a variety of specialized reports, ranging from an index that tracks monthly billings by architecture firms to a weekly report on oil inventory.

The Association of Home Appliance Manufacturers distributes monthly shipment data to nonmembers who pay $600 a year. The data can affect trading in such stocks asGeneral Electric Co., GE +1.67% Whirlpool Corp. WHR +3.13% and AB Electrolux ELUX-B.SK -0.17% . The group also gives its monthly appliance-shipments report to 20 member companies that participate in the survey a day in advance.

Spokeswoman Jill Notini said the association relies on the honor system: “We hope they would use the data appropriately.”

A trade group representing bed manufacturers sells its Bedding Barometer for $1,500 a year to investors. A monthly gauge of mattress sales, the survey can move shares of Tempur Sealy International Inc., TPX +2.27% the world’s largest bedding provider by revenue. A Tempur Sealy representative declined to comment. A representative for the trade group didn’t immediately respond to requests for comment.

Earlier this year, the National Oilseed Processors Association began distributing its monthly soybean-production report through Thomson Reuters Corp. TRI.T +0.11% in the middle of the trading day via the media company’s computer terminals. Under the deal, investors who don’t pay for Thomson Reuters’s Eikon market-data terminals can get the report from the company in real time for $1,200 a year.

The data are closely followed by commodities traders, because members of the association account for 95% of the U.S. soybean processing capacity.

On Monday, the company temporarily stopped selling early peeks at the University of Michigan consumer-confidence survey amid a New York state investigation into whether the arrangement complies with state laws.

“Thomson Reuters strongly believes that news and information companies can legally distribute non-governmental data and exclusive news through services provided to fee-paying subscribers,” a spokesman for Thomson Reuters said.

The University of Michigan deal was featured in a page-one Wall Street Journal article last month detailing how savvy investors get early looks at key data.

On April 15, soybean futures on the Chicago Board of Trade headed lower soon after Thomson Reuters released the report at noon Eastern time. It detailed that the soybean “crush,” or bushels of soybean processed, exceeded analyst expectations.

Soybean prices declined 1.4% in the hours after the report’s release before rebounding, market data show.

Tom Hammer, the president of the oilseed-processors association, said in an interview that the release contains key data for the market. “Only the people who trade on this report need it,” he said.

Informa Economics, a Memphis-based unit of a U.K. company, releases surveys on production of corn, soybeans and wheat about a week before the U.S. Department of Agriculture publishes its own separate reports.

Informa’s subscribers pay between $30,000 and $70,000 a year for the service, according to Bruce Scherr, Informa’s chief executive. Subscribers include big investment firms such as Tudor Investment Corp. and Ospraie Management LP. Tudor and Ospraie representatives declined to comment.

Informa’s proprietary reports, which don’t go out to news organizations, often result in futures-market volume and price moves.

On Dec. 19, at 11:26 a.m., Informa raised its 2013 corn forecast to more than 99 million acres from 97.7 million acres—a higher supply that could ding prices.

Within the next 10 minutes, more than 6,500 units of corn futures traded, a 17% increase from the previous 10 minutes. The price, then $7.11 a bushel, fell 1.2% in less than two hours.

In the case of the commercial-truck-order report—produced by Americas Commercial Transportation Research Co.—any subscribers who read it and bought trucking stocks late March 4 positioned themselves to profit tidily.

The research company sent the report, which showed that North American truck orders had risen to their highest level in more than a year, to clients at 3:45 p.m. Eastern time that day. The first news reports citing the data didn’t surface until after the stock market’s 4 p.m. close.

One investor who bought nearly $3.8 million of truck maker Paccar Inc.’sPCAR +3.74% stock at the end of trading March 4 would have made a $123,000 profit, a 3% return on the investment if he or she closed out the position the next day, according to data from Telvent DTN reviewed by the Journal. Because order data don’t include buyer and seller, it isn’t clear when the investor might have sold.

Another investor who bought nearly $6 million of engine-maker Cummins Inc.’sCMI +1.37% shares late March 4 would have generated a paper profit of $121,000, a 2% return, by cashing out the next day, the data show.

A third investor who bought $756,000 of Navistar NAV +2.43% shares right after the ACT report came out would have earned $42,000, a 6% return, by selling the shares March 5, according to the data.

Trading in those three stocks during the 15 minutes between the release of the truck report and the market close March 4 was a million shares higher than it normally is at that time of day, more than twice the regular volume, according to the Journal’s analysis.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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