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Foundation Medicine (Foundation Medicine) Predictability Rank


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What is Foundation Medicine 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.

Foundation Medicine 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

PredictablesNon-PredictableAll stocks
Total Number of stocks57018332403
Total Lost Money61830891
Total Lost More Than 50%18412430
Total Lost More Than 90%48690
Average Gain260.6%100.0%138.1%
Median Gain150.0%13.0%39.0%
Maximum Gain2852.0%11483.0%11483.0%
Maximum Loss-100.0%-100.0%-100.0%
Annualized Average Gain12.7%6.7%8.4%
Annualized Median Gain8.9%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 Rank5-Star4.5-Star4-Star3.5-Star3-Star2.5-Star2-Star1-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

Foundation Medicine Predictability Rank Related Terms

Thank you for viewing the detailed overview of Foundation Medicine's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.

Foundation Medicine (Foundation Medicine) Business Description

Industry
GURUFOCUS.COM » STOCK LIST » Healthcare » Medical Diagnostics & Research » Foundation Medicine Inc (NAS:FMI) » Definitions » Predictability Rank
Comparable Companies
SYNH MIL:DIA GH BRKR SHSE:603658 SZSE:300676 PRAH CRL NEOG ICLR QDEL GHDX SHSE:603882 MYGN BSP:DASA3 XPAR:ERF MEDP NEO NVTA BEAT
Traded in Other Exchanges
N/A
Address
Website
http://www.foundationmedicine.com
Foundation Medicine Inc is a molecular diagnostics company that specializes in the evaluation and treatment of cancer. Its products provide genetic information about a patient's cancer that is used by physicians to inform clinical decisions and by biopharmaceutical companies to develop targeted oncology therapies. Foundation Medicine's core molecular information products include FoundationOne, for solid tumors, and FoundationOne Heme, for blood-based cancers and hematologic malignancies. The vast majority of the firm's revenue is generated within the United States.
Executives
Alexis Borisy director C/O COMBINATORX, INCORPORATED, 245 FIRST STREET, 16TH FLOOR, CAMBRIDGE MA 02142
Vincent A. Miller officer: Chief Medical Officer C/O FOUNDATION MEDICINE, INC., ONE KENDALL SQUARE, SUITE B3501, CAMBRIDGE MA 02139
Michael J Pellini director 222 DUTTON MILL RD, WILLISTOWN PA 19380
Jason Ryan officer: Chief Financial Officer C/O FOUNDATION MEDICINE, INC., ONE KENDALL SQUARE, SUITE B3501, CAMBRIDGE MA 02139
Troy Cox director, officer: President and CEO C/O FOUNDATION MEDICINE, INC., C/O FOUNDATION MEDICINE, INC., 150 SECON, CAMBRIDGE MA 02141
Robert W. Hesslein officer: SVP and General Counsel C/O FOUNDATION MEDICINE, INC., ONE KENDALL SQUARE, SUITE B3501, CAMBRIDGE MA 02139
Thomas Civik officer: Chief Commercial Officer C/O FOUNDATION MEDICINE, INC., 150 SECOND STREET, CAMBRIDGE MA 02141
Evan/ Fa Jones director C/O OPGEN, INC., 708 QUINCE ORCHARD ROAD, SUITE 205, GAITHERSBURG MD 20878
Michael R Dougherty director C/O ADOLOR CORP, 700 PENNSYLVANIA DR, EXTON PA 19341
Roche Finance Ltd director, 10 percent owner, other: See footnote (1) C/O HOFFMAN LA ROCHE, 124 GRENSACHERSTRASSE CH 4002, BASEL SWITZERLAND V8
Roche Holding Ltd director, 10 percent owner, other: See footnote (1) ROCHE HOLDING, LTD., GRENZACHERSTRASSE 124, BASEL V8 CH-4070
David P Schenkein director C/O BLUEBIRD BIO, INC., 840 MEMORIAL DRIVE, CAMBRIDGE MA 02139
Robert I Tepper 10 percent owner 201 BROOKLINE AVE, SUITE 1401, BOSTON MA 02215
Mark J Levin 10 percent owner 29 NEWBURY STREET, 3RD FLOOR, BOSTON MA 02116
Third Rock Ventures Gp, L.p. 10 percent owner C/O THIRD ROCK VENTURES, 29 NEWBURY STREET, 3RD FLOOR, BOSTON MA 02116