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 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	11.7	19.2	36.8	454.286	17.95	0.93	0.71
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	9.7	3.1	-35.1	9656.613	172.41	55.62	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	13.5	17	14.6	43134.871	18.21	1.07	0.16
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	8.1	31.9	-1.1	910.889	18.90	0.59	1.96
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.5	22.4	2.7	5924.104	13.62	0.61	0.17
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.5	22.4	2.7	6661.186	15.11	0.67	0.30
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	13.8	9.5	7.1	4557.914	21.28	2.24	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	8.5	11.2	36.2	752.832	79.40	7.09	0.00
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	8	0.9	-33.6	208020.188	135.14	150.16	1.22
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	16.9	12	5.3	26264.389	14.33	1.19	2.16
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	0	11.2	-12.8	865.766	8.60	0.77	0.00
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	19.6	36.5	-1.9	2015.302	63.69	1.74	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	12.7	21.4	7.8	5512.062	12.77	0.60	1.52
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	5	8.9	5.8	6721.305	13.59	1.53	0.00
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	34.1	29.6	-16.2	1852.872	7.79	0.26	5.34
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	21.8	14.5	17.2	1493.280	18.98	1.31	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	10.1	26.2	12.2	27453.098	28.65	1.09	1.27
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	10.6	8.5	0.6	24995.961	14.43	1.70	2.49
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	67.3	15.8	-40.1	5161.602	28.49	1.80	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.5	18.5	9.5	9830.041	16.67	0.90	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	11.7	9	24.9	2657.676	27.10	3.01	0.00
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	21.4	8.4	52.1	1036.237	16.86	2.01	0.57
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	19.9	24.4	-27.7	21692.844	14.97	0.61	1.63
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	20.9	33.6	20.5	135359.703	25.97	0.77	1.61
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	20.9	33.6	20.5	132979.484	25.58	0.76	1.43
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	21.1	1.4	37.3	15683.938	20.92	14.94	0.00
Currently 4/5 Business Predictability Rank: 4-Star (On Watch) Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	20.6	10.3	-12.9	446.014	9.19	0.89	0.53
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	14.2	6.3	22.4	28477.777	10.54	1.67	4.20
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	15.5	21.5	0.3	174.518	9.76	0.45	3.27
Currently 4/5 Business Predictability Rank: 4-Star Back Testing Results: Average gain of all 4-Star stocks: 9.8% per year. % of Stocks that are in still loss if held for 10yrs: 8%. Read more: What is Predictability Rank? Performances of real portfolio Top Ranked Predictable Companies	47	50.1	218	1962.489	8.08	0.16	0.84