Emergent Capital (Emergent Capital) Predictability Rank

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What is Emergent Capital Predictability Rank?

Not Rated

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.

Emergent Capital 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

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Emergent Capital (Emergent Capital) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Insurance » Emergent Capital Inc (OTCPK:EMGCQ) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

5355 Town Center Road, Suite 701, Boca Raton, FL, USA, 33486

Website

http://www.emergentcapital.com

Emergent Capital Inc operates as a life insurance company. The firm invests primarily in life settlements, which provide liquidity for the owners of life insurance policies that face a short-term cash need or can no longer afford their insurance premiums. It also focuses on providing portfolio management services. The company receives maximum revenue in the form of interest income. Geographically, the company operates only in the United States of America market region.

Executives

Patrick J Curry	director, 10 percent owner, officer: CEO	5601 WEST WACO DRIVE WACO TX 76710
Pjc Investments, Llc	director, 10 percent owner	204 WOODHEW DRIVE WACO TX 76712
Robert C Knapp	director	C/O IRONSIDES PARTNERS LLC, 100 SUMMER STREET, SUITE 2705, BOSTON MA 02110
Miriam Martinez	officer: CFO and Secretary	C/O IMPERIAL HOLDINGS, INC. 701 PARK OF COMMERCE BLVD., SUITE 301 BOCA RATON FL 33487
Jack Simony	officer: VP and CIO	C/O EMERGENT CAPITAL, INC. 5355 TOWN CENTER ROAD, SUITE 701 BOCA RATON FL 33486
Harvey Z. Werblowsky	officer: VP, CLO and GC	C/O EMERGENT CAPITAL, INC. 5355 TOWN CENTER ROAD, SUITE 701 BOCA RATON FL 33486
Matthew D Houk	director	470 PARK AVENUE SOUTH 4TH FLOOR NEW YORK NY 10016
Roy Patterson	director	17002 MARCY STREET OMAHA NE 68118
James G. Wolf	director	105, FLYWAY DRIVE, KIAWAH ISLAND SC 29455
Patrick Thomas Brennan	director	1 SEA BREEZE COURT NAPA CA 94559
Joseph E Sarachek	director, 10 percent owner	C/O TRIAX CAPITAL ADVISORS, LLC 620 FIFTH AVENUE, 2ND FLOOR NEW YORK NY 10020
Topco 1, Llc	director, 10 percent owner	C/O KELLEY DRYE & WARREN LLP 101 PARK AVENUE NEW YORK NY 10178
Jsarco, Llc	director, 10 percent owner	C/O KELLEY DRYE & WARREN LLP 101 PARK AVENUE NEW YORK NY 10178
Antony Mitchell	other: Former CEO and Director	701 PARK OF COMMERCE BOULEVARD SUITE 301 BOCA RATON FL 33487
James Hua	director	40 LAKE BELLEVUE DRIVE BELLEVUE WA 98108

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