Rockwell Automation (Rockwell Automation) 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 Automation 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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Rockwell Automation (Rockwell Automation) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » Rockwell Automation Inc (NYSE:ROK) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

1ROK:Italy RWL:Germany RWL:Germany

Address

1201 South Second Street, Milwaukee, WI, USA, 53204

Website

https://www.rockwellautomation.com

Rockwell Automation is a pure-play automation competitor that is the successor entity to Rockwell International, which spun off its former Rockwell Collins avionics segment in 2001. As of fiscal 2021, the firm operates through three segments--intelligent devices, software and control, and lifecycle services. Intelligent devices contains its drives, sensors, and industrial components, software and control contains its information and network and security software, while lifecycle services contains its consulting and maintenance services as well as its Sensia JV with SLB.

Executives

Matthew W. Fordenwalt	officer: SVP Lifecycle Services	1201 S. 2ND STREET, MILWAUKEE WI 53204
Christopher Nardecchia	officer: SVP, Chief Information Officer	1201 S. 2ND STREET, MILWAUKEE WI 53204
Rebecca W House	officer: SVP, CLO and Secretary	1201 SOUTH SECOND STREET, MILWAUKEE WI 53204
Frank C Kulaszewicz	officer: SVP	C/O ROCKWELL AUTOMATION, INC., 1201 SOUTH SECOND STREET, MILWAUKEE WI 53204
Blake D. Moret	director, officer: President and CEO	C/O ROCKWELL AUTOMATION, INC., 1201 SOUTH SECOND STREET, MILWAUKEE WI 53204
John M Miller	officer: VP and Chief IP Counsel	C/O ROCKWELL AUTOMATION, INC., 1201 SOUTH SECOND STREET, MILWAUKEE WI 53204
Terry L. Riesterer	officer: Vice President and Controller	1201 S. 2ND STREET, MILWAUKEE WI 53204
Nicholas C Gangestad	officer: Sr. VP and CFO	3M CENTER-OFFICE OF GENERAL COUNSEL, ST. PAUL MN 55144-1000
Veena M Lakkundi	officer: SVP, Strategy & Corp Developmt	3M COMPANY, 3M CENTER, BLDG 220 09 E-02, ST. PAUL MN 55144-1000
Isaac Woods	officer: Vice President and Treasurer	1201 S 2ND STREET, MILWAUKEE WI 53204
Scott Genereux	officer: Sr.VP, Chief Revenue Officer	26650 ALISO VIEJO PARKWAY, ALISO VIEJO CA 92656
Brian A Shepherd	officer: Sr. VP Software and Control	1201 S 2ND STREET, MILWAUKEE WI 53204
Robert L. Buttermore	officer: SVP,Chief Supply Chain Officer	1201 S. 2ND STREET, MILWAUKEE WI 53204
Cyril Perducat	officer: SVP, Technology	1201 S. 2ND STREET, MILWAUKEE WI 53204
Tessa M. Myers	officer: SVP, Intelligent Devices	4545 W BROWN DEER ROAD, P.O. BOX 245036, MILWAUKEE WI 53224