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Global Advisors: a consulting leader in defining quantified strategy, decreasing uncertainty, improving decisions, achieving measureable results.

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Quantified Strategy

Decreased uncertainty, improved decisions

Global Advisors is a leader in defining quantified strategies, decreasing uncertainty, improving decisions and achieving measureable results.

We specialise in providing highly-analytical data-driven recommendations in the face of significant uncertainty.

We utilise advanced predictive analytics to build robust strategies and enable our clients to make calculated decisions.

We support implementation of adaptive capability and capacity.

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Thoughts

Global Advisors’ Thoughts: Outperforming through the downturn AND the cost of ignoring full potential

Global Advisors’ Thoughts: Outperforming through the downturn AND the cost of ignoring full potential

Press drew attention last year to a slew of JSE-listed companies whose share prices had collapsed over the past few years. Some were previous investor darlings. Analysis pointed to a toxic combination of decreasing earnings growth and increased leverage. While this might be a warning to investors of a company in trouble, what fundamentals drive this combination?

In our analysis, company expansion driven by the need to compensate for poor performance in their core business is a typical driver of exactly this outcome.

This article was written in January 2020 but publication was delayed due to the outbreak of Covid-19. Five months after South Africa’s first case, we update our analysis and show that core-based companies outperformed diverse peers by 29% over the period.

Management should always seek to reach full potential in their core business. Attempts to expand should be to a clearly logical set of adjacencies to which they can apply their capabilities using a repeatable business model.

In the article “Steinhoff, Tongaat, Omnia… Here’s the dead giveaway that you should have avoided these companies, says an asset manager,” (Business Insider SA, Jun 11, 2019) Helena Wasserman lists a number of Johannesburg Stock Exchange (JSE) listed shares that have plummeted in recent years.

In many cases these companies’ corresponding sectors have been declining. However, in most of the sectors there is at least one company that has outperformed the rest. What is it about these outperformers that distinguishes them from the rest?

The outperformers have typically shown strong financial performance – be that Growth, ROE, ROA, RONA or Asset Turnover – and varying degrees of leverage. However, performance against these metrics is by no means consistent – see our analysis.

What is consistent is that the outperformers all show clearly delineated core businesses and ongoing growth towards full potential in these businesses alongside growth into clear adjacencies that protect, enhance and leverage the core. In some cases, the core may have been or is currently being redefined, typically through gradual, step-wise extension along logical adjacencies. Redefinition is particularly important in light of the digital transformation seen in many industries. The outperformers are very seldom diversified across unrelated business segments – although isolated examples such as Bidvest clearly exist in other sectors.

Analysis of the over- and underperformers in the sectors highlighted in the article shows that those following a clear core-based strategy have typically outperformed peers through the initial months of the downturn caused by the Covid-19 outbreak.

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Strategy Tools

PODCAST: Effective Transfer Pricing

PODCAST: Effective Transfer Pricing

Our Spotify podcast discusses how to get transfer pricing right.

We discuss effective transfer pricing within organizations, highlighting the prevalent challenges and proposing solutions. The core issue is that poorly implemented internal pricing leads to suboptimal economic decisions, resource allocation problems, and interdepartmental conflict. The hosts advocate for market-based pricing over cost recovery, emphasizing the importance of clear price signals for efficient resource allocation and accurate decision-making. They stress the need for service level agreements, fair cost allocation, and a comprehensive process to manage the political and emotional aspects of internal pricing, ultimately aiming for improved organizational performance and profitability. The podcast includes case studies illustrating successful implementations and the authors’ expertise in this field.

Read more from the original article.

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Fast Facts

Fast Fact: Great returns aren’t enough

Fast Fact: Great returns aren’t enough

Key insights

It’s not enough to just have great returns – top-line growth is just as critical.

In fact, S&P 500 investors rewarded high-growth companies more than high-ROIC companies over the past decade.

While the distinction was less clear on the JSE, what is clear is that getting a balance of growth and returns is critical.

Strong and consistent ROIC or RONA performers provide investors with a steady flow of discounted cash flows – without growth effectively a fixed-income instrument.

Improvements in ROIC through margin improvements, efficiencies and working-capital optimisation provide point-in-time uplifts to share price.

Top-line growth presents a compounding mechanism – ROIC (and improvements) are compounded each year leading to on-going increases in share price.

However, without acceptable levels of ROIC, the benefits of compounding will be subdued and share price appreciation will be depressed – and when ROIC is below WACC value will be destroyed.

Maintaining high levels of growth is not as sustainable as maintaining high levels of ROIC – while both typically decline as industries mature, growth is usually more affected.

Getting the right balance between ROIC and growth is critical to optimising shareholder value.

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Selected News

Quote: Ernest Hemingway – Nobel laureate

Quote: Ernest Hemingway – Nobel laureate

“The world breaks everyone, and afterward, many are strong at the broken places.” – Ernest Hemingway – Nobel laureate

Ernest Miller Hemingway (1899–1961) was an American novelist, short-story writer, and journalist whose terse, understated prose reshaped 20th-century literature, earning him the 1954 Nobel Prize in Literature for “his mastery of the art of narrative, most recently demonstrated in The Old Man and the Sea, and for the influence that he has exerted on contemporary style.” Born in Oak Park, Illinois, Hemingway began his career at 17 as a reporter for the Kansas City Star, honing a concise style that defined his work. During World War I, poor eyesight barred him from enlisting, so he volunteered as an ambulance driver for the Italian army, where shrapnel wounds and a concussion earned him the Italian Silver Medal of Valor; these experiences profoundly shaped his themes of war, loss, and resilience.

Hemingway’s adventurous life mirrored his fiction: he covered the Spanish Civil War, World War II (including D-Day and the liberation of Paris, for which he received a Bronze Star), and African safaris that inspired works like Green Hills of Africa (1935). Major novels such as The Sun Also Rises (1926), A Farewell to Arms (1929), and For Whom the Bell Tolls (1940) established him as a literary giant, blending personal ordeals—two near-fatal plane crashes in 1954 left him in chronic pain—with explorations of human endurance. Despite hating war (“Never think that war, no matter how necessary, nor how justified, is not a crime”), he repeatedly immersed himself in conflict as correspondent and participant. His 1952 novella The Old Man and the Sea won the Pulitzer Prize, cementing his fame before health decline led to suicide in 1961.

Context of the Quote

The quote—“The world breaks everyone, and afterward, many are strong at the broken places”—originates from Hemingway’s 1929 novel A Farewell to Arms, a semi-autobiographical account of his World War I romance with nurse Agnes von Kurowsky amid the Italian front’s devastation. Spoken by the protagonist Frederic Henry, it reflects Hemingway’s meditation on trauma’s dual edge: destruction followed by potential fortification. The novel, published shortly after Hemingway’s own frontline injuries and amid the Lost Generation’s post-war disillusionment, captures how catastrophe forges character, echoing his belief in life’s tragic interest, as seen in his bullfighting treatise Death in the Afternoon (1932). This stoic view permeates his oeuvre, from the emasculated expatriates of The Sun Also Rises to the solitary fisherman’s resolve in The Old Man and the Sea, underscoring resilience amid inevitable breakage.

Leading Theorists on Resilience and Post-Traumatic Growth

Hemingway’s insight prefigures post-traumatic growth (PTG), a concept formalised by psychologists Richard Tedeschi and Lawrence Calhoun in the 1990s, who defined it as positive psychological change after trauma—such as strengthened relationships, new possibilities, and greater appreciation for life—arising precisely from struggle’s “broken places.”. Their research, building on earlier work, posits that while trauma shatters assumptions, deliberate processing rebuilds with enhanced strength, aligning with Hemingway’s literary archetype..

Viktor Frankl, Holocaust survivor and founder of logotherapy, advanced related ideas in Man’s Search for Meaning (1946), arguing that suffering, when met with purpose, catalyses profound growth: “What is to give light must endure burning.” Frankl’s experiences in Auschwitz echoed Hemingway’s war scars, emphasising meaning-making as the path to resilience. Friedrich Nietzsche, whose 1888 aphorism “What does not kill me makes me stronger” (Twilight of the Idols) directly anticipates the quote, framed adversity as a forge for the Übermensch—self-overcoming through trial. Martin Seligman, father of positive psychology, integrated these in the 1990s via learned optimism and resilience factors, identifying agency, cognitive reframing, and social support as mechanisms turning breakage into strength, validated through longitudinal studies.

Theorist
Key Concept
Link to Hemingway’s Quote
Nietzsche
Adversity as strength-builder (“What does not kill me…”)
Direct precursor: trial fortifies the survivor.[1’s thematic resonance]
Frankl
Logotherapy: meaning from suffering
Trauma’s “burning” yields purpose-driven resilience.[6’s war themes]
Tedeschi & Calhoun
Post-traumatic growth
Positive transformation at “broken places” post-shattering.[Novel context]
Seligman
Learned optimism & PERMA model
Empirical tools for rebounding stronger from rupture.[Literary influence]

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Consultants join our firm based on a fit with our values, culture and vision. They believe in and are excited by our differentiated approach. They realise that working on our clients’ most important projects is a privilege. While the problems we solve are strategic to clients, consultants recognise that solutions primarily require hard work – rigorous and thorough analysis, partnering with client team members to overcome political and emotional obstacles, and a large investment in knowledge development and self-growth.

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