What is Telephone and Data Systems 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.
Telephone and Data Systems 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
Telephone and Data Systems (Telephone and Data Systems) Business Description
Traded in Other Exchanges
Address
30 North LaSalle Street, Suite 4000, Chicago, IL, USA, 60602
Telephone and Data Systems Inc is a diversified telecommunications operator that provides mobile, telephone, and broadband services. The company's segments include UScellular and TDS Telecom. It generates maximum revenue from the UScellular segment.
Executives
| Clarence A Davis |
director |
ONEIDA LTD., 163-181 KENWOOD AVENUE, ONEIDA NY 13421 |
| Vicki L Villacrez |
officer: Executive Vice President & CFO |
30 N. LASALLE STREET, SUITE 4000, CHICAGO IL 60602 |
| Dirk S Woessner |
director |
30 N. LASALLE STREET, SUITE 4000, CHICAGO IL 60602 |
| Kurt B Thaus |
officer: Senior VP - CIO |
30 N LASALLE STREET STE 4000, CHICAGO IL 60602 |
| Prudence E Carlson |
director |
30 N LASALLE STREET SUITE 4000, CHICAGO IL 60602 |
| Joseph R Hanley |
officer: VP Technology Planning Service |
535 JUNCTION ROAD, MADISON WI 53717 |
| Gary L Sugarman |
director |
C/O MACHTEN, INC., 1516 BARLOW STREET, SUITE D, TRAVERSE CITY MI 49686 |
| Laurent C Therivel |
director, officer: President of a Subsidiary |
8410 W. BRYN MAWR STREET, CHICAGO IL 60631 |
| Mizuho Securities Usa Llc |
other: See Remarks |
1271 AVENUE OF THE AMERICAS, FLOORS - 2,3,4,18,19, NEW YORK NY 10020 |
| Wade Oosterman |
director |
C/O INGRAM MICRO INC., 1600 E. ST. ANDREW PLACE, SANTA ANA CA 92705 |
| Anita J Kroll |
officer: VP, Controller & CAO |
30 N. LASALLE STREET, SUITE 4000, CHICAGO IL 60602 |
| Scott H Williamson |
officer: Senior Vice President |
C/O TDS INC, 30 N. LASALLE ST #4000, CHICAGO IL 60602 |
| Mitchell H Saranow |
director |
C/O METZLER GROUP INC, 520 LAKE COOK ROAD SUITE 500, DEERFIELD IL 60015 |
| Kenneth R Meyers |
director, officer: Executive Vice President & CFO |
|
| James W Butman |
officer: President & CEO of subsidiary |
30 N. LASALLE STREET, STE. 4000, CHICAGO IL 60602 |
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