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Investing using the Avoid the Human Factor strategy in 2021

How the human factor scores of a few prominent companies has changed from 2021 to 2022.

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

Avoiding the human factor

The human factor (H-Factor) is an actuarial-based portfolio tool, developed by New York-based asset manager 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 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 its published financial results. From these two data inputs we can calculate the probability of the company not 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 not being able to generate the growth implied in its current share price.

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 and New Age Alpha in New York is not to manage portfolios like a portfolio manager but rather to adopt actuarial techniques to asset management.

Looking back to look forward

In 2021 we published a number of articles where we focussed on the Human Factor Score of some listed companies that were prominent in the business news at the time.

So for this article we thought we would revisit these companies and have a look at how their Human Factor Scores have changed since we wrote the articles.

Remember, the probability reflects the ability of the company not being able to deliver the results implied in its share price, thus the lower the probability the better the chance that the company can deliver on the growth implied in the share price. The human factor scores of the listed companies we mentioned in the articles at the time of publishing were as follows:

So where do we stand now?


Netflix over the past few years has become part of many avid TV viewers’ lives. Many of us are subscribers and we find that the content is just so much better than that provided by our previous satellite TV content provider. In addition, anything on Netflix is available on demand when we want it: there’s no more waiting for our favourite series’s next episode to be aired in accordance to a prescribed schedule.

Pre-Covid there were some concerns that with other streaming services being launched this would bring competition to Netflix, but with hard lockdowns around the world this seemed to have cemented Netflix’s position as the global leading online streaming service.

Netflix’s human factor score as at December 31, 2021 reflects an improved probability of being able to deliver on the results implied in the share price.

The human factor score for Netflix is 6.1%.


Distell is one of those companies all South Africans should be aware of, as it produces brands such as Klipdrift Brandy, Amarula Cream, Savanna cider and Bain’s Cape Mountain Whiskey.

In 2021, announcements were made that Heineken was looking to buy Distell.

By the end of 2021 it looked more likely that Heineken was going to buy Distell and that Distell would then delist from the JSE.

From the above table we can see that Distell’s human factor score has gone from 31.4% to 61.4%. Which means that the probability of Distell being able to deliver the growth implied in its share price has decreased.


We followed Discovery with interest in 2021.

Discovery started the year with the best human factor score of all the JSE-listed shares that New Age Alpha measures.

This all changed during 2022, as Discovery announced that all its employees would need to be vaccinated by January 2022 (Well here we are. I wonder if this has been adhered to by Discovery employees?).

In September we took note of the article on Moneyweb which stated that Discovery had “scrapped its annual dividend again” and went further to state that “it may have to raise equity capital to cover costs linked to its investment in China’s Ping An”.

Discovery scraps dividend, flags possible capital raise
Discovery’s Human Factor Score increases significantly

Discovery’s human factor score went from 6.2% to 55.5%, which means that its probability of being able to deliver the results implied in its share price has greatly worsened since the beginning of 2021.

In fact Discovery has only a 44.5% chance of being able to deliver the results required to justify its share price.

Our full updated list of human factor scores for the companies mentioned above is as follows:

Now we wait and see what 2022 brings.

Have a good capital growth year in 2022 everybody.

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Mauro Forlin

Global & Local Asset Management


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