What is Cumulus Media Predictability Rank?
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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.
Cumulus Media 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
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
Cumulus Media (Cumulus Media) Business Description
Traded in Other Exchanges
Address
780 Johnson Ferry Road NE, Suite 500, Atlanta, GA, USA, 30342
Cumulus Media Inc is a radio broadcasting company combining high-quality local programming with iconic, nationally syndicated media, sports, and entertainment brands to deliver premium content choices to its customers and radio stations affiliated with Westwood One network and numerous digital channels. The company's revenue is derived mainly from the sale of local, regional, and national advertising which is broadcast on its radio stations.
Executives
| Deborah A Farrington |
director |
STARVEST PARTNERS, L.P., 750 LEXINGTON AVENUE, 15TH FLOOR, NEW YORK NY 10022 |
| David Edward Milner |
officer: EVP - Operations |
3280 PEACHTREE ROAD, N.W., SUITE 2200, ATLANTA GA 30305 |
| Richard Denning |
officer: EVP, GEN COUNSEL & SECRETARY |
3280 PEACHTREE ROAD NW SUITE 2300, ATLANTA GA 30305 |
| Brigade Capital Management, Lp |
10 percent owner |
399 PARK AVENUE, 16TH FLOOR, NEW YORK NY 10022 |
| Francisco J Lopez-balboa |
officer: EVP and CFO |
3280 PEACHTREE ROAD, N.W., ATLANTA GA 30305 |
| Sallie Kimbrough |
officer: See Remarks |
3280 PEACHTREE ROAD, N.W., SUITE 2200, ATLANTA GA 30305 |
| Robert J Walker |
officer: EVP - Operations |
3280 PEACHTREE ROAD, N.W., SUITE 2200, ATLANTA GA 30305 |
| Mary G. Berner |
director, officer: PRESIDENT & CEO |
C/O CUMULUS MEDIA, INC., 3280 PEACHTREE ROAD, NW, ATLANTA GA 30305 |
| Suzanne M Grimes |
officer: EVP Corporate Marketing |
200 EAST BASSE ROAD, SAN ANTONIO TX 78209 |
| John Abbot |
officer: EVP, TREASURER & CFO |
|
| Sp Signal Manager, Llc |
10 percent owner |
2 GREENWICH PLAZA, FIRST FLOOR, GREENWICH CT 06830 |
| Nimbus Atlas Llc |
10 percent owner |
399 PARK AVENUE, 16TH FLOOR, NEW YORK NY 10022 |
| Thomas H Castro |
director |
C/O TIME WARNER CABLE INC., 60 COLUMBUS CIRCLE, 16TH FLOOR, NEW YORK NY 10023 |
| Matthew Blank |
director |
TWO PENNSYLVANIA PLAZA, NEW YORK NY 10121 |
| David M Baum |
director |
784 MORRIS TURNPIKE #367, SHORT HILLS NJ 07078 |
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