Stanley Black & Decker (Stanley Black & Decker) 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.

Stanley Black & Decker 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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Stanley Black & Decker (Stanley Black & Decker) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » Stanley Black & Decker Inc (NYSE:SWK) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

SWK:Mexico SWF:Germany SWF:Germany S1WK34:Brazil SWK:Austria

Address

1000 Stanley Drive, New Britain, CT, USA, 06053

Website

https://www.stanleyblackanddecker.com

Stanley Black & Decker Inc is a manufacturer of hand and power tools. The company operates in two reportable segments namely Tools and Outdoor and Industrial. It generates maximum revenue from the Tools and Outdoor segment. The Tools and Outdoor segment is comprised of the Power Tools Group (PTG), Hand Tools, Accessories and Storage (HTAS), and Outdoor Power Equipment (Outdoor) businesses. Geographically, it derives a majority of its revenue from the United States.

Executives

Graham Robinson	officer: SVP & President of Industrial	1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Susan K Carter	director	C/O INGERSOLL-RAND COMPANY, 800-E BEATY STREET, DAVIDSON NC 28036
Janet Link	officer: SVP, General Counsel & Sec'y	6501 LEGACY DRIVE, PLANO TX 75024
Christopher John Nelson	officer: Chief Operating Officer	13995 PASTEUR BOULEVARD, PALM BEACH GARDENS FL 33418
Tamer Abuaita	officer: SVP, Global Supply Chain	C/O SOVOS BRANDS, INC., 168 CENTENNIAL PARKWAY, SUITE 200, LOUISVILLE CO 80027
Patrick D Hallinan	officer: EVP, Chief Financial Officer	FORTUNE BRANDS HOME & SECURITY, INC., 520 LAKE COOK ROAD, DEERFIELD IL 60015
John Lucas	officer: SVP, Chief HR Officer	200 INNOVATION WAY, AKRON OH 44316
Walburger Corbin	officer: Interim CFO	1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Scot Greulach	officer: Chief Accounting Officer	1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Robert J Manning	director	1201 THIRD AVE, STE 4900, SEATTLE WA 98101
Andrea J. Ayers	director	STANLEY BLACK & DECKER, IN., 1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Jocelyn Belisle	officer: VP, Chief Accounting Officer	1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Stephen Subasic	officer: SVP, Chief HR Officer	1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Adrian V Mitchell	director	C/O MACY'S, INC., 151 WEST 34TH STREET, NEW YORK NY 10001
Jaime A Ramirez	officer: Pres.Construct.&DIY, Latin Am.	1000 STANLEY DRIVE, NEW BRITAIN CT 06053