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Would you rather own Spar or Shoprite’s shares?

Here’s what their Human-Factor Scores suggest.

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%.

See below:

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.

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 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 are 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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COMMENTS   3

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Definitely Spar shares.

I had Shoprite for 1.5 years and these shares go nowhere since Christo Wiese left. That is my only conclusion seeing that nothing else does.

Analysts have punted this share so many times and it does not have strength to break through the R160

I don’t see the point of this article. Sorry.
It explains the human factor but then has disclaimers all over it saying it’s not a good way to analyse/use for a share.

All companies have people and hence have the “human factor”. Don’t know why some have more “human factor” than others. Apparently, Steinhoff’s “human factor” was very large.

End of comments.

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