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Sibanye Stillwater buys Brazilian mines: The H-Factor score

Sibanye Stillwater announces that it’s buying Brazilian mines for electric vehicle batteries.

Today I came across an announcement on Moneyweb regarding Sibanye Stillwater (JSE Code SSW).

According to the article, Sibanye Stillwater has agreed to pay $1 billion in cash for one of the largest nickel sulphide mines in the world.

This deal highlights the race to supply battery metals to the electric vehicle sector. Nickel is traditionally used in the production of stainless steel and increasingly has become a key component in lithium-ion batteries. Elon Musk apparently appealed to nickel producers a year ago to “Please mine more nickel”

SSW is one of the JSE listed companies that have one of the best “Avoid the Human Factor” (Or H-Factor) score at a probability of 6.1% of SSW not being able to deliver the growth implied by its share price.

As per the above screenshot taken on October 26 2021, of New Age Alpha’s online Human Factor Score tool (available for free by registering on www.newagealpha.com) we can see that the Human Factor Score for SSW was 6.1%.

The score of 6.1% reflects that SSW has a 93.9% probability of being able to deliver the growth implied in their share price.

We at Global & Local Asset Management like looking for miners that mine resources that are actually required for industrial usage, like nickel and uranium. So, in fact, we like the deal SSW has announced and looking at SSW’s H-Factor score, we believe they are able to deliver the growth implied by their share price.

Although I do find it quite interesting (or maybe it’s my imagination running away with me here!)…. 

That SSW announces such a purchase in order to be able to supply components to the electric vehicle battery market a year after Elon Musk asked the nickel miners to mine more nickel (According to the Moneyweb article).

Now we know that these corporate acquisitions take a long time, as they should. Imagine negotiating a deal where you are going to transfer $1 billion (That is $1,000,000,000) over to somebody, where that $1 billion belongs not to you but to your shareholders! You would take a long time to ensure that the close to R15 billion (At rand to US dollar current exchange rates) is being spent wisely.

I can imagine Elon Musk picking up his smartphone about a year ago and speaking to Neal Froneman (CEO of SSW) and saying something like “Hey Neal, do you know any nickel mine that SSW can buy, we need more electric vehicle batteries to keep our production lines moving.” To which Neal replies, “Hey Elon, nice to hear from you again, let me see what I can do for you, there is maybe this one mining company I think maybe in Brazil, no promises Elon, but you know, let me make a few calls!” 

Tesla, according to the Avoiding the Human Factor Tool (herewith below), scores at a probability of 33.4% of not being able to deliver the growth implied by its share price.

The factors around the potential for Tesla to deliver can be quite interesting in that:

  • The high oil price at the moment may push many consumers who are looking at a new car towards electric vehicles that Tesla builds (this is good for SSW as well!).
  • The shortage of semi-conductors may reduce the number of cars Tesla can actually build in the months to come.

Avoiding the Human Factor

The Human Factor (H-Factor) is an actuarially based portfolio tool, developed by New York-based asset managers New Age Alpha, aimed at mitigating the risk of human behaviour in stock picking.

The H-Factor does not seek to generate returns by applying traditional methods such as the common smart beta and factor exposure funds we have all come to know. Instead, the H-Factor quantifies and avoids the risk of human biases in stock picking.

New Age Alpha’s Human Factor tool which is free to use scores over 6 000 shares globally including many JSE listed shares.

The probability used the only two things we know for sure about a listed company: the current share price and the profitability of a company as reported on 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 in holding that share. 

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 generating the growth implied in its current share price.

We at Global & Local Asset Management use the “Avoid the Human Factor” strategy to manage our collective investment scheme portfolios. The strategy focuses on managing portfolios like an actuary and not a portfolio manager.

The strategy comprises developing probabilities which indicate the chance of a listed company NOT being able to achieve the growth implied by 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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Mauro Forlin

Global & Local Asset Management

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