SemiLEDs (SemiLEDs) Predictability Rank

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What is SemiLEDs 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.

SemiLEDs 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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SemiLEDs (SemiLEDs) Business Description

Industry

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

Comparable Companies

Traded in Other Exchanges

6LD1:Germany

Address

3rd Floor, No.11 Ke Jung Road, Chu-Nan Site. Chu-Nan 350, Hsinchu Science Park, Miao-Li County, Miao-Li, TWN, 350

Website

https://www.semileds.com

SemiLEDs Corp develops, manufacture, and sells light-emitting diode chips and LED components. The company's products include LED Chips, LED Components, and Lighting Products. Its products are used for general lighting applications, that includes street lights and commercial, industrial, system and residential lighting; specialty industrial applications, such as ultraviolet, or Ultraviolet, curing of polymers, LED light therapy in medical/cosmetic applications, counterfeit detection, LED lighting for horticulture applications, architectural lighting and entertainment lighting. Substantial revenue is generated from the sale of LED components products. Geographically, it derives a majority of its revenue from the United States.

Executives

Hsin-liang Christopher Lee	officer: Chief Financial Officer	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO LI COUNTY, CHU-HAN F5 F5 350
Scott R. Simplot	director, 10 percent owner	999 MAIN STREET, SUITE 1300, BOISE ID 83702
J.r. Simplot Co	10 percent owner	999 MAIN STREET, SUITE 1300, BOISE ID 83702
Semileds Corp	officer: CFO	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO-LI COUNTY, CHU-NAN F5 350
Roger Lee	director	C/O SEMILEDS CORPORATION, 3F, NO. 11 KE JUNG RD., CHU-NAN SITE, TAIWAN F5 00000
Well Thrive Ltd	10 percent owner	NO. 79, HENG YANG ROAD, TAIPEI F5 100
Sheng-chun Chang	10 percent owner	NO. 79, HENG YANG ROAD, TAIPEI F5 100
Peter Chiou	director	C/O SEMILEDS CORPORATION, 3F, NO. 11 KE JUNG RD., CHU-NAN SITE, MIAO-LI COUNTY CA 350
Walter Michael Gough	director	C/O SEMILEDS CORPORATION, 3F, NO.11 KE JUNG RD., CHU-NAN SITE, MIAO-LI COUNTY F5 00000
Del Prado Arthur H	director	10 JAN VAN EYCKLAAN, BILTHOVEN P7 3723 BC
Anh Chuong Tran	director, 10 percent owner, officer: President and COO	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO-LI COUNTY, CHU-NAN F5 350
Chen-hao Timothy Lin	officer: Chief Financial Officer	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO-LI COUNTY, CHU-NAN F5 350
Ilkan Cokgor	officer: Exec VP of Sales & Marketing	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO-LI COUNTY, CHU-NAN F5 350
Hsieh Edward Kuan Hsiung	director	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO-LI COUNTI, CHU-NAN F5 350
Yingku (adam) Lin	officer: VP Bus. Dev. & General Counsel	3F, NO. 11 KE JUNG RD., CHU-NAN SITE, HSINCHU SCIENCE PARK, MIAO-LI COUNTY, CHU-NAN F5 350