DIOD (Diodes) Predictability Rank

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What is Diodes Predictability Rank?

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.

Diodes 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

Diodes Predictability Rank Related Terms

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Diodes Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Semiconductors » Diodes Inc (NAS:DIOD) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

DDQ:Germany

Address

4949 Hedgcoxe Road, Suite 200, Plano, TX, USA, 75024

Website

https://www.diodes.com

Diodes Inc is a manufacturer and supplier of high-quality application-specific products within the broad discrete, logic, analog, and mixed-signal semiconductor markets. It serves the customer electronics, computing, communications, industrial, and automotive markets. The Company's products include diodes; rectifiers; transistors; MOSFETs; GPP bridges; GPP rectifiers; protection devices; function-specific arrays; single gate logic; amplifiers and comparators; Hall-effect and temperature sensors; and power management devices, including LED drivers, AC-DC converters and controllers, DC-DC switching and linear voltage regulators, voltage references along with special-function devices, such as USB power switches, load switches, voltage supervisors, and motor controllers.

Executives

Emily Yang	officer: VP Worldwide Sales/Marketing	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Brett R Whitmire	officer: CFO, Effective 3/1/2019	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Keh Shew Lu	director	C/O DIODES INC, 3050 E HILLCREST DR, WESTLAKE CA 91362
Peter M Menard	director	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Andy Tsong	officer: President, Diodes Asia	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Gary Yu	officer: SVP, Business Groups	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Julie Holland	officer: VP WW Analog Products	15660 DALLAS PARKWAY, SUITE 850, DALLAS TX 75248
Richard Dallas White	officer: Sr. VP of Finance	3050 E. HILLCREST DRIVE, WESTLAKE VILLAGE CA 91362
Jin Zhao	officer: VP, Worldwide Analog Products	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Elizabeth Bull	director	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024
Michael R Giordano	director	C/O DIODES INC, 3050 E HILLCREST DR, WESTLAKE CA 91362
Evan Yu	officer: VP Worldwide Analog Products	4949 HEDGCOXE ROAD SUITE 200, PLANO TX 75024
Francis Tang	officer: VP, Product Development	3050 E. HILLCREST DRIVE, WESTLAKE VILLAGE CA 91362
C H Chen	director, officer: President & CEO	C/O DIODES INC, 3050 E HILLCREST DR, WESTLAKE CA 91362
Button Angie Chen	director	4949 HEDGCOXE ROAD, SUITE 200, PLANO TX 75024