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Arq (ARQ) Predictability Rank


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What is Arq 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.


Arq 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

Arq Predictability Rank Related Terms

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


Arq Business Description

Traded in Other Exchanges
Address
8051 E. Maplewood Avenue, Suite 210, Greenwood Village, CO, USA, 80111
Arq Inc is an environmental technology company principally engaged in the sale of consumable air, water, and soil treatment solutions including activated carbon (AC) and chemical technologies. The company manufactures and sells activated carbon and other chemicals used to capture and remove contaminants for the coal-fired power generation, industrial, municipal water and air, water and soil treatment and remediation markets. Some of the products in its portfolio are Powdered Activated Carbon, Granula Activated Carbon, and Colloidal Carbon Product among others.
Executives
Richard Campbell-breeden director 30A BROOK STREET, LONDON X0 W1K 5DJ
Jeremy Blank director 6446 DREXEL AVENUE, LOS ANGELES CA 90048
Robert E. Rasmus director, officer: Chief Executive Officer THREE RIVERWAY, SUITE 1350, HOUSTON TX 77056
Joseph M Wong officer: Chief Technology Officer 640 PLAZA DRIVE, SUITE 270, C/O ADVANCED EMISSIONS SOLUTIONS, INC., HIGHLANDS RANCH CO 80129
Jeremy Williamson officer: Chief Operating Officer 8051 E. MAPLEWOOD AVE, SUITE 210, GREENWOOD VILLAGE CO 80111
Laurie Bergman director 460 NORTH GULPH ROAD, KING OF PRUSSIA PA 19406
Arq Ltd 10 percent owner 28-30 THE PARADE, ST. HELIER Y9 JE1 1EQ
Julian Alexander Mcintyre director 30A BROOK STREET, LONDON X0 W1K 5DJ
Morgan Fields officer: VP of Accounting 890 SANTA CRUZ AVE., MENLO PARK CA 94025
Christine Bellino officer: Chief Accounting Officer 8051 E. MAPLEWOOD AVE., SUITE 210, GREENWOOD VILLAGE CO 80111
Alta Fundamental Advisers Sp Llc director 1500 BROADWAY, SUITE 704, NEW YORK NY 10036
Carol S Eicher director ROHM AND HAAS COMPANY, 100 INDEPENDENCE MALL WEST, PHILADELPHIA PA 19106
Brian Leen director 640 PLAZA DRIVE, SUITE 270, C/O ADVANCED EMISSIONS SOLUTIONS, INC., HIGHLANDS RANCH CO 80129
Ron Hanson officer: SVP of Operations of ADA-ES 9135 S RIDGELINE BLVD, SUITE 200, HIGHLANDS RANCH CO 80129
Theodore James Sanders officer: General Counsel 640 PLAZA DRIVE, SUITE 270, HIGHLANDS RANCH CO 80129