Companies Ranked by Business Predictability

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What is Predictability Rank?

GuruFocus recently conducted a back test study of Warren Buffett's strategy "buy good companies at fair prices" for the years 1998-2008. We focused on the companies that Warren Buffett likes, which are the companies that have predictable and proven earnings. For details, go to: GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank.

From this study we have developed the concept of Predictability Rank of businesses. We have found strong correlations between the Predictability of Businesses and the long term return of stocks, as shown in this table.

Predictability Rank	5-Star	4.5-Star	4 -Star	3.5-Star	3 -Star	2.5-Star	2 -Star	1-Star (non-predictable)	Average among all
Average Annualized Gain (Jan. 1998- Aug. 2008)	12.1%	10.6%	9.8%	9.3%	8.2%	7.3%	6.0%	1.1%	3.1%
% that are in loss with 10-year holding period	3%	10%	8%	9%	11%	18%	16%	45%	37%

We can clearly see that companies with higher Predictability Rank had much better stock performances. The possibility of losing money with long term holding period is also greatly reduced.

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Predictability	10-Y EBITDA Growth Rate (%)	5-Y EBITDA Growth Rate (%)	12-M EBITDA Growth Rate (%)	Market Cap ($mil)	P/E	PE/5-Y EBITDA Growth Rate	Yield
Currently 5/5 Business Predictability Rank: 5-Star (On Watch) Back Testing Results: Average gain of all 5-Star stocks: 12.1% per year. % of Stocks that are in still loss if held for 10yrs: 3%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	5.3	1.5	-7.3	422.112	29.67	19.78	0.00
Currently 5/5 Business Predictability Rank: 5-Star (On Watch) Back Testing Results: Average gain of all 5-Star stocks: 12.1% per year. % of Stocks that are in still loss if held for 10yrs: 3%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.1	10.3	-3.1	421.176	18.98	1.84	1.04
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	12.3	16.4	6.2	1422.593	9.91	0.60	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	12.6	19.4	-10.6	1387.396	31.85	1.64	0.45
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	13.3	11	4.4	32210.523	29.85	2.71	0.76
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.8	5.5	20.6	1896.475	17.70	3.22	0.16
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	26.8	16.4	-1.9	1024.515	7.54	0.46	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	8.2	15.3	25.3	100846.055	18.25	1.19	2.04
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	10.6	28.6	14	993.173	18.50	0.65	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	24	44.3	-9.3	1979.273	35.46	0.80	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	10.6	11.5	3.3	4930.574	29.33	2.55	0.97
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	6.4	8.7	8.7	12374.069	19.65	2.26	2.49
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	0	14.7	15.9	2063.253	27.25	1.85	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	12.2	9.3	27.9	10170.620	13.46	1.45	4.33
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.2	9.1	-1.8	4784.690	23.47	2.58	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.2	9.1	-1.8	4901.390	23.09	2.54	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	13	24.4	11.8	15114.862	15.15	0.62	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	21.9	20.1	7.7	69.052	24.57	1.22	6.26
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	10.6	14.8	1.7	9723.205	23.98	1.62	1.64
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	14.4	25.4	6.5	226.561	7.45	0.29	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	28.7	22.2	23.7	6248.099	25.71	1.16	0.78
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	18.9	26.4	19	12230.082	22.32	0.85	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	13.9	5.6	-19.2	284605.719	18.02	3.22	2.55
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.2	12.8	23.8	1093.008	16.26	1.27	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	11.1	5.6	-2	6107.736	19.05	3.40	3.09
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	12.5	15.3	6.4	11551.207	12.38	0.81	2.54
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.4	18.4	18.2	3096.666	5.80	0.32	5.75
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.4	18.4	18.2	3140.175	5.89	0.32	5.52
Currently 4.5/5 Business Predictability Rank: 4.5-Star Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.9	7.7	14.4	2135.600	18.35	2.38	0.00
Currently 4.5/5 Business Predictability Rank: 4.5-Star (On Watch) Back Testing Results: Average gain of all 4.5-Star stocks: 10.6% per year. % of Stocks that are in still loss if held for 10yrs: 10%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.4	5.2	-30.9	46156.055	10.91	2.10	3.78