Arrow Electronics (Arrow Electronics) Predictability Rank

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What is Arrow Electronics Predictability Rank?

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.

Arrow Electronics 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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Arrow Electronics (Arrow Electronics) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Hardware » Arrow Electronics Inc (NYSE:ARW) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

ARW:Germany

Address

9201 East Dry Creek Road, Centennial, CO, USA, 80112

Website

https://investor.arrow.com

Arrow Electronics Inc. is a provider of products, services, and solutions to industrial and commercial users of electronic components and enterprise computing solutions. It has one of the world's broadest portfolios of product offerings available from electronic components and enterprise computing solutions suppliers, coupled with a range of services, solutions, and software, the company helps industrial and commercial customers introduce products, reduce their time to market, and enhance their overall competitiveness. The company has two business segments, the components business and the enterprise computing solutions.

Executives

Richard John Marano	officer: President, Global Components	9201 E DRY CREEK ROAD, CENTENNIAL CO 80112
Gail Hamilton	director	20330 STEVENS CREEK BLVD., CUPERTINO CA 95014
Kirk Schell	officer: President, Global Components	9201 E DRY CREEK ROAD, CENTENNIAL CO 80112
Gretchen Zech	officer: SVP, Global Human Resources	9201 E DRY CREEK RD, CENTENNIAL CO 80112
Andrew Charles Kerin	director	C/O ARAMARK CORPORATION, 1101 MARKET STREET, PHILADELPHIA PA 19107
Mary T Mcdowell	director
Michael J Long	director, officer: Chairman, President & CEO	9201 EAST DRY CREEK ROAD, CENTENNIAL CO 80112
Kristin Diana Russell	officer: President, Global ECS	9201 E. DRY CREEK RD., CENTENNIAL CO 80112
Vincent P Melvin	officer: Chief Information Officer	ARROW ELECTRONICS, INC., 9201 EAST DRY CREEK ROAD, CENTENNIAL CO 80112
Rajesh K. Agrawal	officer: SVP, Chief Financial Officer	9201 E. DRY CREEK RD., CENTENNIAL CO 80112
Carine Lamercie Jean-claude	officer: SVP, Chief Legal Officer	9201 E. DRY CREEK RD., CENTENNIAL CO 80112
David Alan West	officer: President, Global Components	9201 E. DRY CREEK RD., CENTENNIAL CO 80112
Christopher Stansbury	officer: SVP & Chief Financial Officer	C/O ARROW ELECTRONICS, INC, 9201 EAST DRY CREEK ROAD, CENTENNIAL CO 80112
Charles Ii Kostalnick	officer: Chief Supply Chain Officer	2700 NORTH FIRST STREET, SAN JOSE CA 95134
Carol P Lowe	director	4311 BEULAH CHURCH ROAD, WEDDINGTON NC 28104