Google trends can be a very powerful tool for stock investing. Knowing in almost real time the sum of all Google searches for a particular company name or product can tell you a lot about the company and give you hints of its respective stocks movements.
A problem arises when the search data for a company is given too much weight, especially when the company in question does not monetize or has very limited monetization via the web. The best way to exemplify this is to compare say a mining company vs. an online photostock company. Let’s assume that changes in searches are a result of consumers search queries. An equal increase of a million searches for the mining company will have a negligible effect on the company’s sales as their monetization medium is in the physical economy where transactions are made more or less face to face. On the other hand, a million searches for an online photostock company whom monetizes primarily online will mean much more. The nominal sales made from visitors would increase directly due to the increased traffic to the webpage where monetization takes place, thus having an effect on the company’s bottom line.
It is for this reason that Trendvesting focuses in on the tech realm providing statistics on the most searched stocks within the NASDAQ 100 as these would be the stocks that would respond the most (in theory) to changes in Google searches.
[On a monthly basis we at Trendvesting compile the most searched stocks that comprise the NASDAQ 100 index. See here for Most Searched Stocks in April 2014 and here for Most Searched Stocks in March 2014.]