What is Rockwell Medical Predictability Rank?
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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.
Rockwell Medical 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
Rockwell Medical (Rockwell Medical) Business Description
Traded in Other Exchanges
Address
30142 S. Wixom Road, Wixom, MI, USA, 48393
Rockwell Medical Inc is a healthcare company that develops, manufactures, commercializes, and distributes a portfolio of hemodialysis products for dialysis providers. Rockwell Medical's mission is to provide dialysis clinics and patients with the highest quality products supported by the best customer service in the industry. It is focused on innovative, long-term growth strategies that enhance products, processes, and people, enabling the company to deliver exceptional value to the healthcare system and provide a positive impact on the lives of hemodialysis patients.
Executives
| Jesse Neri |
officer: SVP, FINANCE |
851 DUPORTAIL ROAD, SECOND FLOOR, CHESTERBROOK PA 19087 |
| Joan Lau |
director |
C/O RENOVACOR, INC., 5 MEAD POINT DRIVE, GREENWICH CT 06830 |
| Russell Skibsted |
officer: See Remarks |
15 TRANQUILITY PLACE, LADERA RANCH CA 92694 |
| Megan C. Timmins |
officer: SVP, General Counsel |
600 LEE ROAD, SUITE 100, WAYNE PA 19087 |
| Mark Strobeck |
director, officer: President and CEO |
460 EAST SWEDESFORD ROAD, SUITE 1050, WAYNE PA 19087 |
| Allen Nissenson |
director |
601 HAWAII ST., EL SEGUNDO CA 90245 |
| Robert S Radie |
director |
101 LINDENWOOD DRIVE, SUITE 225, MALVERN PA 19355 |
| Andrea Heslin Smiley |
director |
600 LEE ROAD, SUITE 100, WAYNE PA 19087 |
| David S. Richmond |
10 percent owner, other: See Footnote 1 |
3568 WILDWOOD AVENUE, JACKSON MI 49202 |
| Russell H Ellison |
director |
270 RIVERSIDE DR., APT. 12D, NEW YORK NY 10025 |
| Marc L Hoffman |
officer: Chief Medical Officer |
30142 WIXOM ROAD, WIXOM MI 48393 |
| John Peter Mclaughlin |
director |
C/O PDL BIOPHARMA, INC., 932 SOUTHWOOD BOULEVARD, INCLINE VILLAGE NV 89451 |
| Richmond Brothers, Inc. |
10 percent owner, other: See Footnote 1 |
7415 FOXWORTH COURT, JACKSON MI 49201 |
| Stuart M Paul |
director, officer: Chief Executive Officer |
HOME DIAGNOSTICS, INC., 2400 NW 55TH COURT, FORT LAUDERDALE FL 33309 |
| Angus W. Smith |
officer: Chief Financial Officer |
C/O PERNIX THERAPEUTICS HOLDINGS, INC., 10 NORTH PARK PLACE, SUITE 201, MORRISTOWN NJ 07960 |
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