Atmel (ATML) Predictability Rank

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What is Atmel 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.

Atmel 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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Atmel (ATML) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Semiconductors » Atmel Corp (NAS:ATML) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.atmel.com

Atmel Corp was originally incorporated in California on December 5, 1984 and was reincorporated in Delaware in October 1999. The Company designs, develops and supplies microcontrollers, which are self-contained computers-on-a-chip. It organizes its business into four reportable operating segments; Microcontrollers, Nonvolatile Memories, Radio Frequency, and Application Specific Integrated Circuits. Its Microcontrollers segment includes Atmel's maXTouch capacitive touch product families and its general purpose microcontroller and microprocessor families, AVR 8-bit and 32-bit products, ARM based products, Atmel's 8051 8-bit products, designated commercial wireless products, including low power radio and SOC products that meet Zigbee and Wi-Fi specifications and optimized products for mobile sensor hub, smart energy, touch button and LED lighting applications. Its Nonvolatile Memories segment includes electrically erasable programmable read-only "EEPROM" and erasable programmable read-only memory "EPROM" devices. Its Radio Frequency and Automotive segment includes automotive electronics, wireless and wired devices for industrial, consumer and automotive applications and foundry services. Its Application Specific Integrated Circuits segment includes custom application specific integrated circuits designed to meet specialized single-customer requirements for its high performance devices, including products that provide hardware security for embedded digital systems, products with military and aerospace applications and application specific standard products for space applications, power management and secure cryptographic memory products. The Company markets its products in various countries to a diverse base of OEMs serving commercial markets. It also sells its products to OEM accounts through its direct sales force, using manufacturers' representatives or through national and regional distributors. It sells its products in United States, Asia and Europe. Throughout its product line, the Company competes with a number of semiconductor manufacturers, such as Cypress, Freescale, Infineon, Intel, Microchip, NXP Semiconductors, ON Semiconductor, Renesas, Samsung, Silicon Labs, Spansion, STMicroelectronics, Synaptics, and Texas Instruments. The Company relies on patents, copyrights, trademarks and trade secrets, as well as nondisclosure agreements and other methods to protect its proprietary technologies and processes.

Executives

Steven Laub	director, officer: President & CEO	5555 NE MOORE CT., HILLSBORO OR 97124
Stephen A Skaggs	officer: SVP & CFO	5555 NE MOORE CT., HILLSBORO OR 97124
Charles Carinalli	director
David Sugishita	director	2325 ORCHARD PARKWAY, SAN JOSE CA 95131
Jack L Saltich	director	9460 NORTH 57TH STREET, PARADISE VALLEY AZ 85253
Papken Der Torossian	director	1250 RELIANCE WAY, FREMONT CA 94539
Jamie Samath	officer: VP & Corporate Controller	NATIONAL SEMICONDUCTOR, 2900 SEMICONDUCTOR DR, M/S C1-640, SANTA CLARA CA 95051
Stephen Cumming	officer: VP Finance and CFO	2325 ORCHARD PARKWAY, SAN JOSE CA 95131
Walter Lifsey	officer: EVP & Chief Operating Officer	C/O GATES INDUSTRIAL CORPORATION PLC, 1144 FIFTEENTH STREET, SUITE 1400, DENVER CO 80202
T Peter Thomas	director	3000 SAND HILL ROAD, 2-290 MENLO PARK CA 94025
Francis P Barton	director	C/O INVENTERGY GLOBAL, INC., 900 E. HAMILTON AVENUE, SUITE 180, CAMPBELL CA 95008