FactSet Research Systems (FactSet Research Systems) Predictability Rank

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What is FactSet Research Systems 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.

FactSet Research 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

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FactSet Research Systems (FactSet Research Systems) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Capital Markets » FactSet Research Systems Inc (NYSE:FDS) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

FDS:Mexico FA1:Germany

Address

45 Glover Avenue, 7th Floor, Norwalk, CT, USA, 06850

Website

https://www.factset.com

FactSet provides financial data and portfolio analytics to the Global investment community. The company aggregates data from third-party data suppliers, news sources, exchanges, brokerages, and contributors into its workstations. In addition, it provides essential portfolio analytics that companies use to monitor portfolios and address reporting requirements. Buy-side clients account for 82% of FactSet's annual subscription value. In 2015, the company acquired Portware, a provider of trade execution software. In 2017, it acquired BISAM, a risk management and performance measurement provider. In 2022, it completed its purchase of CUSIP Global Services.

Executives

Frederick Philip Snow	director, officer: Chief Executive Officer	45 GLOVER AVENUE, NORWALK CT 06850
Laurie Siegel	director	C/O VOLT INFORMATION SCIENCES, INC., 1133 AVENUE OF THE AMERICAS, 15TH FLOOR, NEW YORK NY 10036
Katherine M Stepp	officer: Chief Technology Officer (CTO)	FACTSET RESEARCH SYSTEMS INC., 45 GLOVER AVENUE, NORWALK CT 06850
Rachel Rebecca Stern	officer: EVP, Chief Legal Officer	45 GLOVER AVENUE, NORWALK CT 06850
Robert J. Robie	officer: EVP, Head of Trading&Analytics	45 GLOVER AVENUE, NORWALK CT 06850
Christopher R Ellis	officer: EVP, Initiatives & P'ships	FACTSET RESEARCH SYSTEMS INC., 45 GLOVER AVENUE, NORWALK CT 06850
Malcolm Frank	director	FACTSET RESEARCH SYSTEMS INC., 45 GLOVER AVENUE, NORWALK CT 06850
Goran Skoko	officer: EVP, Wealth Solutions	45 GLOVER AVENUE, NORWALK CT 06850
Kristina W Karnovsky	officer: EVP, Chief Product Officer	45 GLOVER AVENUE, NORWALK CT 06850
John Costigan	officer: Chief Content Officer	FACTSET RESEARCH SYSTEMS, 45 GLOVER AVENUE, NORWALK CT 06850
Catrina Harding	officer: Chief People Officer	FACTSET RESEARCH SYSTEMS INC., 45 GLOVER AVENUE, NORWALK CT 06850
Jonathan Reeve	officer: EVP, Senior Head of CTS	601 MAIN AVENUE, NORWALK CT 06851
Shlomo Elisha Wiesel	director	FACTSET RESEARCH SYSTEMS INC., 45 GLOVER AVENUE, NORWALK CT 06850
Sheila B Jordan	director	601 MERRITT 7, NORWALK CT 06851
Joseph Zimmel	director	601 MERRITT 7, NORWALK CT 06851