What is PNC Financial Services Group Predictability Rank?
3.5 (5)
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.
PNC Financial Services Group 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
Also read:
Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety
PNC Financial Services Group (PNC Financial Services Group) Business Description
Traded in Other Exchanges
Address
300 Fifth Avenue, The Tower at PNC Plaza, Pittsburgh, PA, USA, 15222-2401
PNC Financial Services Group is a diversified financial services company offering retail banking, corporate and institutional banking, asset management, and residential mortgage banking across the United States.
Executives
| Guild Deborah |
officer: Executive Vice President |
847 PERSIMMON ROAD, SEWICKLEY PA 15143 |
| Bryan Scott Salesky |
director |
2545 RAILROAD ST, SUITE 400, PITTSBURGH PA 15222 |
| Joseph Alvarado |
director |
705 N. BAR Y ROAD, P.O. BOX 11368, JACKSON WY 83002 |
| Kieran John Fallon |
officer: Executive Vice President |
17160 SPRING CREEK LANE, LEESBURG VA 20176 |
| Michael P. Lyons |
officer: Executive Vice President |
249 FIFTH AVENUE, 1PNC, PITTSBURGH PA 15222 |
| William S Demchak |
officer: Vice Chairman and CFO |
THE TOWER AT PNC PLAZA, 300 FIFTH AVENUE, PITTSBURGH PA 15222-2707 |
| Overstrom Alexander E. C. |
officer: Executive Vice President |
643 PITCAIRN PLACE, PITTSBURGH PA 15232 |
| Renu Khator |
director |
11 GREENWAY PLAZA, SUITE 2400, HOUSTON TX 77046 |
| Robert A Niblock |
director |
1605 CURTIS BRIDGE ROAD, WILKESBORO NC 28697 |
| Martin Pfinsgraff |
director |
354 KINGSBERRY DRIVE, ANNAPOLIS MD 21409 |
| Michael J Hannon |
officer: Chief Credit Policy Officer |
249 FIFTH AVE, P1-POPP-30-1, PITTSBURGH PA 15222 |
| Karen L. Larrimer |
officer: Executive Vice President |
ONE PNC PLAZA, 249 FIFTH AVENUE, PITTSBURGH PA 15222-2707 |
| Ganesh Manapra Krishnan |
officer: Executive Vice President |
6416 INTERLAKEN DR, MCDONALD PA 15057 |
| David L Cohen |
director |
|
| Richard Kevin Bynum |
officer: Executive Vice President |
7567 GLEN POINTE CT., SPRINGFIELD VA 22153 |
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