South Africa’s “go-to” store, Spar, posted their half-year results to March 31, 2021, a few days ago. The results were fair and despite ongoing uncertainty around the effects of the Covid-19 pandemic, the Spar Group declared an interim gross cash dividend of 280 cents per share.
The above and further comments are based on the article published on Moneyweb on May 25.
In the article, it states that Spar, which owns grocery and wholesale businesses in South Africa, several other African Countries and also in Switzerland, Poland and Ireland, has posted a positive set of interim results for the half-year.
The group increased turnover by 7.5% to R64.2 billion.
According to the article and an interview I listened to on the radio, Spar’s results were largely driven by the operations in Switzerland and Ireland rather than its significantly larger operations in Southern Africa. In fact, Spar Switzerland reported an increase in turnover of 21.6% for the six-month period (11.1% growth in Swiss Francs).
In contrast, Spar Southern Africa delivered a wholesale growth turnover of 3.1% for the half-year, which Spar says “reflects weaker consumer spend and disruptions to the liquor business”.
I found the next part of the article very interesting as it stated:
“This is in stark contrast to its JSE-listed peers Shoprite Group and Pick n Pay, which have seen strong growth locally despite ongoing uncertainty around the Covid-19 pandemic.”
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 Human Factor Score
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 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 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.
The Human Factor Score for Spar
The current Human Factor Score for Spar is 56%. This means that Spar has a 56% chance of NOT being able to deliver the growth implied in its current share price.
The question going back to the Moneyweb article’s comment about Spar versus Shoprite and Pick n Pay therefore is:
How does Spar’s Human Factor Score compare to its peers, Shoprite (SHP) and Pick n Pay (PIK)?
By using Global & Local Asset Management’s New York-based associates, New Age Alpha, who developed the Human Factor Score, an online tool available on www.newagealpha.com, we can see that Spar has a Human Factor Score of 56%, but Shoprite has a Human Factor Score of 66.1% and Pick n Pay of 68.5%.
Hence, we can say that according to the current Human-Factor Score, we would rather hold Spar shares rather than Pick n Pay or Shoprite.
In fact, we would rather hold Distell (DGH) as opposed to Spar based on the Human-Factor Scores.
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 Spar, Shoprite, Pick n Pay or in fact, Distell 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 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.
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
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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.
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