SHARES

Musk buys 9.2% of Twitter, but will he realise the growth implied in the share price?

Twitter, therefore, has a 36.5% probability of delivering the growth implied in its share price.

On Tuesday, April 5 2022 the business press was alive with the news that billionaire and ex-South African, Elon Musk bought 9.2% of Twitter (TWTR) for a reported $2.9 billion based on Friday, April 1’s share price.

Musk bought 73.5 million shares which pushed the Twitter share price up by 27.1% to $45.97 per share.

For more information on this news story, click here.

Musk is a frequent Twitter user with more than 80 million followers and posts “interesting” statements on Twitter from time to time.

We, at Global & Local Asset Management, believe that Musk should have asked himself this very important question before purchasing this block of Twitter shares: 

Is Twitter able to deliver the growth implied in the share price? 

We at Global & Local Asset Management would have advised Musk to consult New Age Alpha’s, “Avoid the Human Factor Score” to view the probability of Twitter NOT being able to deliver on the growth implied in the share price.

New Age Alpha’s “Avoid the Human Factor” tool on the New Age Alpha website scores over 6 000 shares globally including many JSE listed shares, and provides a score for Twitter at 63.5%.

This score of 63.5% indicates that Twitter has a 63.5% probability of NOT delivering on the growth implied in its current share price.

This probability can be switched over to state that Twitter, therefore, has a 36.5% probability of DELIVERING the growth implied in its share price.

The “H-Factor” strategy comprises developing probabilities that indicate the chance of a listed company NOT being able to achieve the growth implied by its current share price.

The probability uses the only two things we know for sure about a listed company, that is the current share price and the profitability of a company as reported in the published financial results. From these two data inputs, we can calculate the probability of the company being able to produce the results implied in the share price based on whether the company has done this in the past 16 reporting periods.

Simply put, the lower the Human Factor Score a listed share has, the lower the risk of holding that share in a portfolio. 

How does Twitter’s Human Factor Score compare to its peers?

By using Global & Local Asset Management’s, New York-based associates, New Age Alpha, who developed the Human Factor Score, online tool, we can see that, as mentioned, Twitter has a Human Factor Score of 63.5%, but Meta Platforms (Facebook) has a Human Factor Score of 12.6%.

Hence, if Musk had asked Global & Local Asset Management if he should buy Twitter shares, we would have responded that according to the current Human-Factor Score, we would rather have Meta Platform shares in a portfolio and not Twitter.

We must add that at Global & Local Asset Management, we do realise that share investing cannot always be this simplified as there might be many other factors to consider when investing in listed shares.

Neither are we advocating that Twitter or in fact Meta Platforms are good shares for individual investors to buy now or even at a later stage as this article is not about providing advice to individual investors.

Using a probability-based approach to portfolio management

Using a probability-based approach to stock selection, we identify and avoid the risks present when share investors interpret vague and ambiguous information inherent in share prices in a systematically incorrect way.

The Human Factor Score measures the probability of the listed company not generating the growth implied in its current share price.

The approach taken by Global & Local Asset Management is not to manage portfolios like a portfolio manager but rather to adopt actuarial techniques to asset management.

If you would like to know more about how the Human-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 Advisors 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 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.

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ADVISOR PROFILE

Mauro Forlin

Global & Local Asset Management

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What happened to the .1% more recorded by the FSB on the original sale of these shares to Musk? Did it exist and were they sold on the price rise after Musks purchase? This seems to be his modi’s operandi – Drive a price up with a large purchase ( and the hype around the purchase) ..then take profit from the very price rise he created! He did it with Bitcoin and got away with it – is he doing the same with Twitter?

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