AOREF (American Overseas Group) Predictability Rank

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What is American Overseas Group Predictability Rank?

Not Rated

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.

American Overseas Group 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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American Overseas Group Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Insurance » American Overseas Group Ltd (OTCPK:AOREF) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

Cumberland House 6th Floor 1 Victoria Street, Hamilton, BMU, HM 11

Website

https://www.aoreltd.com

American Overseas Group Ltd is a Barbados-based insurance and reinsurance group with tax residency in the United Kingdom. The company's core business has transitioned from financial guaranty reinsurance, mostly of public finance and structured finance debt obligations, to writing nonstandard auto insurance through its Texas-based subsidiary.

Executives

Edward U Gilpin	officer: Chief Financial Officer	134 HOMMELVILLE ROAD, SAUGERTIES NY 12477
Bradley M Shuster	director	2100 POWELL STREET, 12TH FLOOR, EMERYVILLE CA 94608
Joseph M Donovan	director	2929 ARCH STREET, 17TH FLOOR, PHILADELPHIA PA 19104-2870
David L Boyle	director	C/O AMBAC FINANCIAL GROUP INC, 1 STATE STREET PLAZA, NEW YORK NY 10004
Allan S Bufferd	director
Cummings Robert F Jr	10 percent owner	C/O MOORE CORP, ONE CANTARBURG GREET, STAMFORD CT 006901
Joseph H Wender	10 percent owner	2855 GAZELLE COURT, CARLSBAD CA 92010
Robert Hamwee	10 percent owner	C/O NEW MOUNTAIN FINANCE CORPORATION, 787 7TH AVENUE, 48TH FLOOR, NEW YORK NY 10019
Eckert Alfred C Iii	10 percent owner	12 EAST 49TH STREET SUITE 3200 NEW YORK NY 10017
Richard M Hayden	10 percent owner
Transatlantic Holdings Inc	10 percent owner	80 PINE STREET NEW YORK NY 10005
Kyle Waldhauer	10 percent owner	30 ROCKEFELLER PLAZA, NEW YORK NY 10112
Thomas V Inglesby	10 percent owner	535 MADISON AVENUE, NEW YORK NY 10022