GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Arlington Asset Investment Corp (NYSE:AAIC) » Definitions » Predictability Rank

Arlington Asset Investment (Arlington Asset Investment) Predictability Rank


View and export this data going back to 1997. Start your Free Trial

What is Arlington Asset Investment Predictability Rank?

1 (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.

Arlington Asset Investment 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

PredictablesNon-PredictableAll stocks
Total Number of stocks57018332403
Total Lost Money61830891
Total Lost More Than 50%18412430
Total Lost More Than 90%48690
Average Gain260.6%100.0%138.1%
Median Gain150.0%13.0%39.0%
Maximum Gain2852.0%11483.0%11483.0%
Maximum Loss-100.0%-100.0%-100.0%
Annualized Average Gain12.7%6.7%8.4%
Annualized Median Gain8.9%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 Rank5-Star4.5-Star4-Star3.5-Star3-Star2.5-Star2-Star1-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

Arlington Asset Investment Predictability Rank Related Terms

Thank you for viewing the detailed overview of Arlington Asset Investment's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.

Arlington Asset Investment (Arlington Asset Investment) Business Description

Industry
GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Arlington Asset Investment Corp (NYSE:AAIC) » Definitions » Predictability Rank
Comparable Companies
AJX LFT CHMI MITT SEVN EARN SACH ACR WMC LOAN NLY STWD AGNC RITM BXMT ABR RC CMTG ARI LADR
Traded in Other Exchanges
N/A
Address
6862 Elm Street, Suite 320, McLean, VA, USA, 22101
Website
https://www.arlingtonasset.com
Arlington Asset Investment Corp is a U.S. based principal investment company. The company holds a leveraged MBS investment portfolio, including Agency MBS, private-label MBS, private-label interest-only MBS, and net long TBA positions, with Agency MBS accounting for the majority of total investment capital. Agency MBS consists of residential mortgage pass-through certificates, for which the U.S. government agency and government-sponsored enterprise guarantee the principal and interest payments. The company generates the majority of its total interest income from Agency MBS. The company focuses its business in the United States.
Executives
Daniel E Berce director 801 CHERRY STREET, SUITE 3900, C/O GM FINANCIAL COMPANY, INC., FORT WORTH TX 76102
Richard Ernst Konzmann officer: EVP, CFO and Treasurer 6862 ELM STREET, SUITE 320, MCLEAN VA 22101
Tonkel J Rock Jr director, officer: President and CEO 6862 ELM STREET, SUITE 320, MCLEAN VA 22101
Melinda H Mcclure director C/O INDEPENDENCE REALTY TRUST, 1835 MARKET STREET, SUITE 2601, PHILADELPHIA PA 19103
Eric F Billings director, officer: Executive Chairman 1001 19TH STREET NORTH, SUITE 1900, ARLINGTON VA 22209
Michael Ralph S Iii director
Benjamin J. Strickler officer: See Remarks C/O ARLINGTON ASSET INVESTMENT CORP., 6862 ELM STREET, SUITE 320, MCLEAN VA 22101
David W Faeder director 909 ROSE AVENUE - SUITE 200, NORTH BETHESDA MD 20852
Peter A Gallagher director 1001 19TH STREET NORTH, SUITE 1900, ARLINGTON VA 22209
Daniel Joseph Altobello director 6550 ROCK SPRING DR, SUITE 550, BETHESDA MD 20817
Nader Anthony P Iii director 6862 ELM STREET, SUITE 320, MCLEAN VA 22101
Kurt R Harrington officer: EVP, CFO and Treasurer 2529 VIRGINIA BEACH BOULEVARD, SUITE 200, VIRGINIA BEACH VA 23534
Wallace L Timmeny director 1122 INTERNATIONAL BLVD., SUITE 601, BURLINGTON A6 L7L 6Z8
Partners Group Alternative Strategies Pcc Ltd Gold Iota Cell 10 percent owner C/O PASSPORT MANAGEMENT, LLC, 30 HOTALING PLACE, STE. 300, SAN FRANCISCO CA 94111
Passport Capital, Llc 10 percent owner 1 LETTERMAN DRIVE, BUILDING A, SUITE A4-900, SAN FRANCISCO CA 94129