What is Inphi Predictability Rank?
1 (5)
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.
Inphi 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
Inphi (IPHI) Business Description
Traded in Other Exchanges
N/A
Address
110 Rio Robles, Santa Clara, CA, USA, 95134
Inphi Corp. is a provider of high-speed analog and mixed signal semiconductor solutions for the communications, data center, and computing markets. The company's semiconductor solutions are designed to address bandwidth bottlenecks in networks, maximize throughput, and minimize latency in computing environments. For peak performance, Inphi works with system vendors to develop proprietary component, channel, and system simulation models. These models are used to predict system performance prior to fabricating the semiconductor.
Executives
| Ron Torten |
officer: Sr. VP Operations & IT |
2953 BUNKER HILL LANE SUITE 300 SANTA CLARA CA 95054 |
| Ford Tamer |
director, officer: President & CEO |
3945 FREEDOM CIRCLE SUITE 1100, SANTA CLARA CA 95054 |
| Richard Ogawa |
officer: General Counsel |
2953 BUNKER HILL LANE, SUITE 300, SANTA CLARA CA 95054 |
| John Edmunds |
officer: Chief Financial Officer |
3408 GARRETT DRIVE SANTA CLARA CA 95054-2803 |
| Charles Roach |
officer: Sr. V.P. of Worldwide Sales |
2953 BUNKER HILL LANE SUITE 300 SANTA CLARA CA 95054 |
| Sam Srinivasan |
director |
C/O AQUANTIA CORP, 105 TASMAN DRIVE SAN JOSE CA 95134 |
| Bruce M Mcwilliams |
director |
2032 BLARRITZ PL SAN JOSE CA 95138 |
| William J Ruehle |
director |
16215 ALTON PARKWAY PO BOX 57013 IRVINE CA 92619-7013 |
| David E Liddle |
director |
C/O THE NEW YORK TIMES CO, 229 WEST 43RD ST, NEW YORK NY 10036 |
| Nicholas Brathwaite |
director |
C/O POWER INTEGRATIONS, 5245 HELLYER AVE, SAN JOSE CA 95138 |
| Diosdado P Banatao |
director |
C/O TALLWOOD VENTURE CAPITAL 635 WAVERLY STREET PALO ALTO CA 94301 |
| Elissa E. Murphy |
director |
C/O WILSON SONSINI GOODRICH & ROSATI, 650 PAGE MILL ROAD, PALO ALTO CA 94304 |
| Chenming Hu |
director |
2060 PEBBLE DRIVE, ALAMO CA 94507 |
| Norman Yeung |
officer: Sr. V. P., Engineering |
3945 FREEDOM CIRCLE SUITE 1100 SANTA CLARA CA 95054 |
| David J Ladd |
director |
2800 SANDHILL ROAD SUITE 250 MENIO PARK CA 94025 |
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