I’ve was very impressed by one of the Value Strategies
on GuruFocus.com, which is Undervalued Predictable Companies
. As following the site, it is the most outperforming the S&P compared to other strategies since Inception. Whereas the Buffett-Munger Screener top 25 returned 64.5% since 2009, the Top 25 Undervalued Predictable Companies returned a breathtaking 87.4%.
The way GuruFocus ranked the predictability level
based on the consistency of the revenue per share and EBITDA per share over the past 10 years, and on the correlation between stock performance and the predictability of the business. Indeed, as Warren Buffett
say, in the short term, we should not care about the movement of the stock price. But over the long run, the stock price does reflect the fundamentals of the business. For stocks receiving a 5-star ranking, the average annualized gain in the period of 1998-2008 was 12.1% and only 3% that were in loss in that 10-year holding period. So I begin to search for 5-star predictability, combined with sustainable earnings and cash flows, trading at reasonable prices that plunged for a year. Continue Reading »