Companies that have competitive advantages. It can maintain or even expand its profit margin while growing its business
Companies that incur little debt while growing business
Companies that are fair valued or under-valued. We use PEPG as indicator. PEPG is the P/E ratio divided by the average growth rate of EBITDA over the past 5 years.
From the back testing study from 1998-2008 we have found strong correlations between the Predictability of Businesses and the long term return of stocks,
the group of undervalued highly predictable companies performed the best. This group had an annualized gain of 20%, while the market just averaged 2.7% a year.
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