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 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	6.9	1.9	15200.899	26.18	3.79	1.37
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	13.3	15.2	-54.4	13967.729	13.72	0.90	3.11
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	14.9	15.5	14.5	11784.830	16.81	1.08	1.85
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	16	17.1	5.1	10498.771	22.12	1.29	0.56
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	19.3	24.6	-4.2	14.034	15.97	0.65	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	11.8	12.4	0	3332.128	24.80	2.00	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	10.7	17.1	42.1	926.100	24.21	1.42	0.30
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	11.5	29.1	-6.4	994.092	13.57	0.47	1.16
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	27.9	45.8	-15.4	2970.933	12.61	0.28	2.71
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	15.4	29	-10.6	1255.884	16.64	0.57	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	16.3	38.9	36.4	2858.387	14.77	0.38	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	9	24.1	12.9	3047.893	26.11	1.08	1.98
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	24.1	12.9	3059.669	26.04	1.08	1.98
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	20.9	30.2	14.8	6180.000	17.73	0.59	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	19.3	26.6	-7.6	22243.400	14.12	0.53	2.11
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	14.9	19.8	-13.1	382.702	14.60	0.74	0.56
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	7.8	10.3	-0.4	80.165	11.47	1.11	3.59
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	7.9	1.5	11387.448	7.03	0.89	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	22.3	26.6	5.1	1069.909	34.36	1.29	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	12.7	22	1.3	11910.400	34.84	1.58	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	37.9	11.4	2.2	2840.200	42.37	3.72	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	22	16.7	-35.9	11640.972	14.37	0.86	1.80
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	11.9	9.1	-4.6	1108.400	4.97	0.55	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	11.9	9.1	-4.6	1296.300	6.86	0.75	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	28.3	25.4	-33.9	4713.472	8.03	0.32	2.62
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	26.4	9.4	9.9	1067.587	17.70	1.88	1.30
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	25.8	7.9	-50.7	584.800	5.26	0.67	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	9.5	10	4.9	56592.609	24.45	2.44	1.24
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	16.2	20.3	15.3	34335.602	20.12	0.99	2.33
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	13.7	22.2	-2.2	19681.102	12.27	0.55	1.26