CHINA FUND (CHINA FUND) Predictability Rank

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What is CHINA FUND 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.

CHINA FUND 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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CHINA FUND (CHINA FUND) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Asset Management » CHINA FUND INC (NYSE:CHN) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

C/o Brown Brothers Harriman & Co, 50 Post Office Square, Boston, MA, USA, 02110

Website

https://www.chinafundinc.com

CHINA FUND INC is a non-diversified, closed-end management investment company. Its investment objective is a long-term capital appreciation which it seeks to achieve by investing in equity securities with trading in China and outside China. It invests in various industries such as Insurance, Entertainment, Machinery, Electrical Equipment, Beverages, Hotels, Restaurants and Leisure among others.

Executives

Yan Hu	director	60 VICTORIA EMBANKMENT, LONDON X0 EC4Y 0JP
Theresa Noriega-lum	officer: President	4 EMBARCADERO CENTER, SUITE 550, SAN FRANCISCO CA 94111
Iwanicki George John Jr	director	8K THORMAN LANE, HUNTINGTON NY 11743
Julian Reid	10 percent owner	C/O BROWN BROTHERS HARRIMAN, 50 POST OFFICE SQUARE, BOSTON MA 02110
City Of London Investment Group Plc	10 percent owner	77 GRACECHURCH STREET, LONDON X0 EC3V0AS
Frank L Wheeler	officer: President	FOUR EMBARCADERO CENTER, SUITE 550, SAN FRANCISCO CA 94111
Michael F Holland	director
Richard Silver	10 percent owner	C/O STATE STREET BANK AND TRUST COMPANY, ONE LINCOLN STREET, BOSTON MA 02111
City Of London Investment Management Co Ltd	10 percent owner	77 GRACECHURCH STREET, LONDON X0 EC3V0AS
Heiko Mildner	other: Affiliated Person	1633 BROADWAY, NEW YORK NY 10019
Kathleen C. Thompson	other: Affiliated Person	1633 BROADWAY, NEW YORK NY 10019
Jeffrey D Parker	other: See remarks	1345 AVENUE OF THE AMERICAS, NEW YORK NY 10105
Douglas Eu	other: SEE REMARKS	C/O ALLIANZ GLOBAL INVESTORS U.S. LLC, 1633 BROADWAY, NEW YORK NY 10019
William Grau	other: SEE REMARKS	C/O ALLIANZ GLOBAL INVESTORS U.S. LLC, 1633 BROADWAY, NEW YORK NY 10019
Laura F. Dell	officer: Treasurer	100 HUNTINGTON AVENUE, CPH 0326, BOSTON MA 02116