Lifeway Foods (Lifeway Foods) Predictability Rank

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What is Lifeway Foods 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.

Lifeway Foods 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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Lifeway Foods (Lifeway Foods) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Defensive » Consumer Packaged Goods » Lifeway Foods Inc (NAS:LWAY) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

LWF:Germany

Address

6431 West Oakton Street, Morton Grove, IL, USA, 60053

Website

https://www.lifewaykefir.com

Lifeway Foods Inc is engaged in manufacturing probiotic, cultured, functional dairy health food products. Its primary product is drinkable kefir which is a cultured dairy product. Its product categories are Drinkable Kefir which is the key revenue-driving product, European-style soft cheeses, Cream, ProBugs, Frozen Kefir and Other dairy. The company manufacture and market products under the Lifeway and Fresh Made brand names, as well as under private labels on behalf of customers. It sells the products primarily through direct sales force, brokers, and distributors.

Executives

Edward Smolyansky	officer: CFO, Treasurer
Julie Smolyansky	director, officer: President and CEO
Ludmila Smolyansky	director, 10 percent owner
Juan Carlos Dalto	director	3059 TOWNSGATE ROAD, WESTLAKE VILLAGE CA 91361
Perfecto Sanchez	director	153 DIEHL ROAD, CALLICOON NY 12723
Dorri Mcwhorter	director	6431 OAKTON STREET, C/O LIFEWAY FOODS, INC., MORTON GROVE IL 60053
Jody Levy	director	6431 OAKTON STREET, C/O LIFEWAY FOODS, INC., MORTON GROVE IL 60053
George Sent	director	C/O LIFEWAY FOODS, 6431 OAKTON STREET, MORTON GROVE IL 60053
Amy M. Feldman	officer: SENIOR EXECUTIVE VP OF SALES	C/O LIFEWAY FOODS, 6431 OAKTON STREET, MORTON GROVE IL 60053
Neha J Clark	officer: Chief Financial Officer	C/O LIFEWAY FOODS, 6431 OAKTON STREET, MORTON GROVE IL 60053
Eric A Hanson	officer: Chief Accounting Officer	C/O LIFEWAY FOODS, 6431 OAKTON STREET, MORTON GROVE IL 60053
Laurent Marcel	director	C/O DANONE NA, 1 MAPLE AVE, WHITE PLAINS NY 10605
Douglas Hass	officer: Gen Counsel & Asst Corp Sec.	1205 KIMBALL BLVD., JASPER IN 47546
Jennifer Reilly	officer: Sr Exec V. President of Sales	6431 W. OAKTON STREET, MORTON GROVE IL 60053
John P Waldron	officer: Chief Financial officer	LIFEWAY FOODS, INC., 6431 W. OAKTON STREET, MORTON GROVE IL 60053