What is Ampco-Pittsburgh Predictability Rank?
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Warren Buffett said many times that the companies he likes are:
1. Simple businesses that he understands
2. that have predictable and proven earnings and
3. with economic moat
4. those can be bought at a reasonable price.
It is hard to quantify "simple businesses that he (Buffett) understands", so we will focus on the other three characteristics instead. In GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank, we will show that the businesses that have predictable and proven earnings are usually also simple businesses that an average person could understand.
GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.
Ampco-Pittsburgh Predictability Rank Calculation
In our database there are 2403 stocks that have been traded from Jan. 2, 1998 to Aug. 31, 2008. We have the complete 10-year financial data and trading prices of these companies for this period. We rank the predictability of these companies based on the consistency of their revenue per share and EBITDA (earning before interest, tax, depreciation and amortization) per share over the past ten fiscal years, and study the correlation between the stock performances and the predictability of the business.
Our study may be subject to these biases and assumptions:
Dividend yields are not counted for investment returns
Effects of price changes due to spin-offs may not be fully adjusted
Study is subjected to survivorship bias due to de-listing, bankruptcy, LBO, M&A, etc.
The correlation between business predictability and investment returns of a company is showed below.
Correlation Between Business Predictability and Investment Returns
| Predictables | Non-Predictable | All stocks |
|---|
| Total Number of stocks | 570 | 1833 | 2403 |
| Total Lost Money | 61 | 830 | 891 |
| Total Lost More Than 50% | 18 | 412 | 430 |
| Total Lost More Than 90% | 4 | 86 | 90 |
| Average Gain | 260.6% | 100.0% | 138.1% |
| Median Gain | 150.0% | 13.0% | 39.0% |
| Maximum Gain | 2852.0% | 11483.0% | 11483.0% |
| Maximum Loss | -100.0% | -100.0% | -100.0% |
| Annualized Average Gain | 12.7% | 6.7% | 8.4% |
| Annualized Median Gain | 8.9% | 1.1% | 3.1% |
For the 570 predictable companies, we have seen strong correlation between the predictability of businesses and the stock performances over the past 10 years, regardless of the valuation of business at 1998. Accordingly, we have ranked the business predictability from 5-star to 1-star, 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 |
|---|
| % Out of All 2403 Stocks |
3.3% |
2.9% |
3.7% |
3.3% |
3.3% |
3.7% |
3.3% |
76.3% |
100% |
| % that are in Loss (10y) |
3% |
10% |
8% |
9% |
11% |
18% |
16% |
45% |
37% |
| Average Gain (10y) |
364.6% |
330.9% |
278.0% |
235.1% |
243.5% |
227.8% |
154.8% |
100.0% |
138.1% |
| Median Gain (10y) |
238.5% |
193.5% |
171.0% |
159.0% |
132.5% |
113.5% |
87.0% |
13.0% |
39.0% |
| Maximum Gainer |
2228.0% |
2547.0% |
2452.0% |
2852.0% |
2432.0% |
1892.0% |
1807.0% |
11483.0% |
11483.0% |
| Maximum Loser |
-82.0% |
-53.0% |
-67.0% |
-100.0% |
-83.0% |
-100.0% |
-78.0% |
-100.0% |
-100.0% |
| Annualized Average Gain |
15.4% |
14.6% |
13.2% |
12.0% |
12.2% |
11.7% |
9.1% |
6.7% |
8.4% |
| Annualized Median Gain |
12.1% |
10.6% |
9.8% |
9.3% |
8.2% |
7.3% |
6.0% |
1.1% |
3.1% |
For detailed information about each predictability rank, please go to GuruFocus Research: What worked in the market from 1998-2008? Part I: Introduction of Predictability Rank
Also read:
Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety
Ampco-Pittsburgh (Ampco-Pittsburgh) Business Description
Traded in Other Exchanges
N/A
Address
726 Bell Avenue, Suite 301, Carnegie, PA, USA, 15106
Ampco-Pittsburgh Corp is a U,S.-based company manufacturing and selling engineered, specialty metal products and customized equipment. It operates in two business segments namely the Forged and Cast Engineered Products segment and the Air and Liquid Processing segment. The Forged and Cast Engineered Products segment produces forged hardened steel rolls, cast rolls, and open-die forged products. Forged hardened steel rolls are used in cold rolling mills by producers of steel, aluminum, and other metals whereas, the Air and Liquid Processing segment includes Aerofin, Buffalo Air Handling, and Buffalo Pumps. The company generates a majority of its revenue from the Forged and Cast Engineered Products segment. It has a business presence in the U,S and other countries.
Executives
| Darrell L Mcnair |
director |
726 BELL AVENUE, SUITE 301, CARNEGIE PA 15106 |
| Frederick D. Disanto |
director |
6060 PARKLAND, SUITE 200, CLEVELAND OH 44124 |
| David George Anderson |
officer: President,Air&Liq. Proc. Group |
726 BELL AVENUE, SUITE 301, CARNEGIE PA 15106 |
| Robert Demichiei |
director |
726 BELL AVE., SUITE 301, PO BOX 457, CARNEGIE PA 15106 |
| Michael G Mcauley |
officer: CFO & Treasurer |
1550 CORAOPOLIS HEIGHTS ROAD, SUITE 500, PITTSBURGH PA 15108 |
| Louis Berkman Investment Co |
10 percent owner |
330 N. SEVENTH STREET, STEUBENVILLE OH 43952 |
| Brett Mcbrayer |
director, officer: Chief Executive Officer |
726 BELL AVENUE, SUITE 301, CARNEGIE PA 15106 |
| Pforzheimer Carl H Ii |
director |
CARL H PFORZHEIMER & CO, 650 MADISON 23 FLOOR, NEW YORK NY 10022 |
| Samuel Lyon |
officer: President of Union Electric |
C/O UNION ELECTRIC STEEL CORPORATION, 726 BELL AVENUE, CARNEGIE PA 15106 |
| Elizabeth Anne Fessenden |
director |
1137 WEST AVENUE, RICHMOND VA 23220 |
| Crawford United Corp |
other: Member of 10% owner group |
10514 DUPONT AVE, CLEVELAND OH 44108 |
| Edward F Crawford |
other: Member of 10% owner group |
|
| 2006 Irrevocable Trust Of Laura W. Van Loan For The Benefit Of Mary M. Crawford |
other: Member of 10% owner group |
6065 PARKLAND BOULEVARD, CLEVELAND OH 44124 |
| Altor Ii Aggregator Topco Ltd |
10 percent owner |
11-15 SEATON PLACE, ST. HELIER Y9 JE4 0QH |
| Terry L Dunlap |
director |
1000 SIX PPG PLACE, PITTSBURGH PA 15222 |
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