Valero Energy (Valero Energy) Predictability Rank

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What is Valero Energy 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.

Valero Energy 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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Valero Energy (Valero Energy) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Energy » Oil & Gas » Valero Energy Corp (NYSE:VLO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

VLO:Mexico V1L:Germany V1L:Germany VLOE34:Brazil

Address

One Valero Way, San Antonio, TX, USA, 78249

Website

https://www.valero.com

Valero Energy is one of the largest independent refiners in the United States. It operates 15 refineries with a total throughput capacity of 3.2 million barrels a day in the United States, Canada, and the United Kingdom. Valero also owns 12 ethanol plants with capacity of 1.6 billion gallons of ethanol a year and holds a 50% stake in Diamond Green Diesel, which has capacity to produce 1.2 billion gallons per year of renewable diesel.

Executives

Joseph W Gorder	director, officer: COB & CEO	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
Rayford Jr Wilkins	director	208 S. AKARD ST., --, DALLAS TX 75202
Marie A Ffolkes	director	17450 COLLEGE PARKWAY, LIVONIA MI 48152
Kimberly S, Greene	director	30 IVAN ALLEN JR. BLVD., NW, ATLANTA GA 30308
Philip J. Pfeiffer	director	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
Deborah P Majoras	director	ONE PROCTER & GAMBLE PLAZA, CINCINNATI OH 45202
Robert Profusek	director	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
Donald L Nickles	director	6100 N WESTERN AVENUE, P O BOX 18496, OKLAHOMA CITY OK 73118
Gary K. Simmons	officer: EVP & CCO	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
R. Lane Riggs	officer: EVP and COO	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
Fred M Diaz	director	9614 AMALFI CT, BRENTWOOD TN 37027
Paulett Eberhart	director	C/O LPL FINANCIAL, 4707 EXECUTIVE DRIVE, SAN DIEGO CA 32121
Cheryl L. Thomas	officer: SVP & CTO	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
Richard Joe Walsh	officer: SVP and GC	P.O. BOX 696000, SAN ANTONIO TX 78269-6000
Jason W. Fraser	officer: EVP and CFO	P.O. BOX 696000, SAN ANTONIO TX 78269-6000