Clicks buys Pick n Pay pharmacies: Their Human Factor Scores

If you were a share investor, which share would you rather own?

According to this article published on Fin24, Clicks is going to buy Pick n Pay’s pharmacies.

In the article the Pick n Pay chief operating officer, Adrian Naudé said that the future key objectives of Pick n Pay do not include the development of a pharmacy division.

Clicks has the largest retail pharmacy network in South Africa and with this deal, Clicks will increase its footprint to 632 pharmacies and in contrast to Pick n Pay’s strategy Clicks claims that 50% of the country’s population live within 6 kilometres of a Clicks pharmacy and with the Pick n Pay deal, Clicks aims to improve this statistic according to the Clicks CEO Vikesh Ramsunder, as quoted in the above-mentioned article.

This deal is far from closed as the transaction is still subject to approval by the Competition Commission and the regulatory authorities.

Now, if you were a share investor, which share would you rather own, Clicks or Pick n Pay?

We at Global & Local Asset Management use the “Avoid the Human Factor” strategy to manage our portfolios. The strategy focuses on managing portfolios like an actuary and not a portfolio manager. The strategy comprises of developing probabilities that indicate the chance of a listed company NOT being able to achieve the growth implied by its current share price.

If we were to view the Clicks Human Factor Score, we would see that our New York associates New Age Alpha, who developed the Human Factor Score and publish these scores on their website for free, have indicated that Clicks has a 34% probability of NOT being able to deliver the growth implied in its share price.

Whereas Pick n Pay’s Human Factor Score reflects a 64% probability of NOT being able to deliver the growth in its share price.

Therefore, to answer the earlier question, should one own Clicks or Pick n Pay shares? The response would be that purely in accordance with the Human Factor Score provided by New Age Alpha, one should own Clicks rather than Pick n Pay, as Pick n Pay shares seem to be overvalued in comparison to Clicks.

We realise that share investing is simply NOT this easy, and so if you are a potential or current share investor, you should not take this article as advice to buy or sell either of these shares! Rather speak to a share investment professional.

One should take into consideration many other factors such as how is Clicks going to pay for this purchase of Pick n Pay’s pharmacies? What are the terms of the financing arrangements Clicks may have to enter into to complete this transaction? How will this transaction affect Pick n Pay and what are they going to do with the cash generated through the sale of their pharmacies?

Stock prices are affected by human behaviour. This creates a risk that investors are not fully aware of, that erodes alpha and that they are not compensated for taking, a risk we call the H-Factor.

Using the probability-based approach for stock selection, we help investors identify and avoid this risk.

The Human Factor Score measures the risk of human behaviour inherent in any company’s share price, the probability takes into account whether the company has provided the growth implied in its share price in the past.

If you would like to know more about how the H-Factor score tool works and how we “Avoid the Losers”, then please contact us at Global & Local Asset Management.

Disclosures

Global & Local Investment Advisors (Pty) Ltd is a registered financial services provider in terms of the Financial Advisory and Intermediary Services Act (FAIS). Global & Local Investment Advisors (Pty) Ltd holds FSP license number 43286.

Global & Local Asset Management (Pty) Ltd. Reg. Number: 2018/580284/07

Global & Local Asset Management is an authorised juristic representative of Global & Local Investment Advisors (PTY) Ltd FSCA License Number: 43286.

Any investment performance figures quoted herein are for illustrative purposes only and should not be construed as investment advice.

Investment advice can be provided by Global & local Investment Advisors (Pty) Ltd but only after an analysis has been conducted of the investor’s current financial circumstances and investment portfolio, only then will a recommendation be provided based on that investor’s own circumstances by Global & Local Investment Advisors (Pty) Ltd.

New Age Alpha refers to the New Age Alpha separate but affiliated entities, generally, rather than to one particular entity. These entities are New Age Alpha LLC, New Age Alpha Advisors, LLC (“New Age Alpha Advisors”) and New Age Tau, LLC.

Investment advice is offered through New Age Alpha Advisors, LLC a wholly-owned subsidiary of New Age Alpha LLC.

New Age Alpha Advisors is an investment advisor registered with the U.S. Securities and Exchange Commission. New Age Alpha Advisors, located in the State of New York, only transacts business in those states in which it is properly registered or qualifies for an applicable exemption or exclusion from such state’s registration requirements.

Past performance is not indicative of future results. Current and future results may be lower or higher than those shown. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by New Age Alpha), or an Index, product, or strategy made reference to directly or indirectly in this firm overview, will be profitable or equal to corresponding indicated performance levels. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. Historical performance results for investment indexes and/or categories generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment management fee, the incurrence of which would have the effect of decreasing historical performance results. Returns for one year or less are not annualised but calculated as cumulative returns.

No client or prospective client should assume that any information presented in this firm overview serves as the receipt of, or a substitute for, personalized individual advice from New Age Alpha or any other investment professional. Any charts, graphs or tables used in this firm overview are for illustrative purposes only and should not be construed as providing investment advice. Information contained herein does not reflect the actual performance of New Age Alpha’s products or portfolios. All research and data is simulated and should not be considered indicative of the skill of New Age Alpha. The research data presented has been calculated by applying each Index strategy backwards in time and is not a contemporaneous record of actual assets managed by New Age Alpha.

All New Age Alpha trademarks are owned by New Age Alpha LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (SPFS). All other company or product names mentioned herein, including S&P®, are the property of their respective owners and should not be deemed to be an endorsement of any New Age Alpha product or strategy. This firm overview is limited to providing general information about New Age Alpha and its investment advisory services. It is for informational purposes only and should not be construed by a client or a prospective client as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice. New Age Alpha’s specific advice is given only within the context of its contractual agreements with each client. Investment advice may only be rendered after the delivery of Form ADV Part 2 (an investment advisor’s disclosure document) and the execution of an investment agreement by the client and New Age Alpha. New Age Alpha’s Form ADV Part 2 and descriptions and summary annual reports or its composites are available upon request.

ADVISOR PROFILE

Mauro Forlin

Global & Local Asset Management

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