CapStar Financial Holdings (CapStar Financial Holdings) Predictability Rank

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What is CapStar Financial Holdings 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.

CapStar Financial Holdings 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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CapStar Financial Holdings (CapStar Financial Holdings) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Banks » CapStar Financial Holdings Inc (NAS:CSTR) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

1201 Demonbreun Street, Suite 700, Nashville, TN, USA, 37203

Website

https://www.capstarbank.com

CapStar Financial Holdings Inc is a bank holding company for CapStar Bank. The products and services offered by the bank include commercial and industrial loans to small and medium-sized businesses, commercial real estate loans, private banking and wealth management services, correspondent banking services, and various other retail and consumer products. The company's primary sources of revenue are derived from interest and dividends earned on loans, investment securities, and other financial instruments.

Executives

Alison Lee Jefferson	officer: Interim Prin. Acctg. Officer	406 11TH AVENUE NORTH, SUITE 200, NASHVILLE TN 37203
Michael J Fowler	officer: See Remarks	100 NORTH MAIN STREET, GREENEVILLE TN 37743-4992
William Tilden Delay	director	115 LYNNWOOD TERRACE, NASHVILLE TN 37205
Harrison Frist	director	C/O KHOSLA VENTURES ACQUISITION CO. III, 2128 SAND HILL RD, MENLO PARK CA 94025
Thomas R. Flynn	director	606 DEEPWOOD DRIVE, HOPKINSVILLE KY 42240
Kenneth E Webb	officer: EVP of Bank Operations	6226 BROWNLEE DRIVE, NASHVILLE TN 37205
Jeffrey L Moody	officer: Principal Accounting Officer	CAPSTAR FIN. HOLDINGS INC-BRENT BINNS, 1201 DEMONBREUN STREET, SUITE 700, NASHVILLE TN 37203
Amy C Goodin	officer: Chief Risk Officer	CAPSTAR FIN. HOLDINGS INC-BRENT BINNS, 1201 DEMONBREUN STREET, SUITE 700, NASHVILLE TN 37203
Turner James S. Jr.	director	138 2ND AVENUE NORTH, NASHVILLE TN 37201
Denis J. Duncan	officer: See Remarks	1201 DEMONBREUN STREET, SUITE 700, NASHVILLE TN 37203
Sam B. Devane	director	CAPSTAR FIN. HOLDINGS INC.-BRENT BINNS, 1201 DEMONBREUN STREET, SUITE 700, NASHVILLE TN 37203
Kevin Lambert	officer: Chief Credit Officer	CAPSTAR FIN. HOLDINGS INC-BRENT BINNS, 1201 DEMONBREUN STREET, SUITE 700, NASHVILLE TN 37203
Valora S. Gurganious	director	CAPSTAR FIN. HOLDINGS INC.-BRENT BINNS, 1201 DEMONBREUN STREET, SUITE 700, NASHVILLE TN 37203
Christopher G Tietz	officer: See Remarks	185 EAST MARKET STREET, ATTN: LEGAL DEPARTMENT, WARREN OH 44481
Capstar Financial Holdings, Inc.	officer: Chief Financial Officer	1201 DEMONBREUN STREET, SUITE 700, SUITE 700, NASHVILLE TN 37203