GPC (Genuine Parts Co) Predictability Rank

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What is Genuine Parts Co 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.

Genuine Parts Co 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

Genuine Parts Co Predictability Rank Related Terms

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Genuine Parts Co Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Consumer Cyclical » Vehicles & Parts » Genuine Parts Co (NYSE:GPC) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

GPC:Mexico 0IUX:UK GPT:Germany GPT:Germany G1PC34:Brazil

Address

2999 Wildwood Parkway, Atlanta, GA, USA, 30339

Website

https://www.genpt.com

Genuine Parts sells aftermarket automotive parts (about 60% of sales) and industrial products (40% of sales) in the United States and internationally. The automotive segment primarily acts as a distributor to its network of 9,800 global retail locations of which about two thirds are independently owned and operated. we estimate Genuine serves around 6,000 retail locations in the US operating under the Napa Auto Parts brand, with about 80% of end market sales derived from professional customers. Its industrial segment, primarily operating under the Motion banner in the United States, serves as a leading distributor of bearings, power transmission, and other industrial products to more than 200,000 maintenance, repair, and original equipment manufacturer clients.

Executives

Randall P Breaux	officer: Group President, GPC N.A.	5711 R S BOREHAM JR ST, P O BOX 2400, FORT SMITH AR 72902
Wendy B Needham	director	2999 CIRCLE 75 PRKWAY, ATLANTA GA 30339
Gary P Fayard	director	ONE COCA COLA PLAZA, ATLANTA GA 30313
John D Johns	director	PO BOX 2606, BIRMINGHAM AL 35202
Juliette Williams Pryor	director	1000 LOWE'S BOULEVARD, MOORESVILLE NC 28117
John R Holder	director	999 PEACHTREE ST NE, SUITE 688, ATLANTA GA 30309
Donna Westbrook Hyland	director	3344 PEACHTREE ROAD NE STE 1800, ATLANTA GA 30326
Paul Russell Hardin	director	2999 WILDWOOD PARKWAY SE, ATLANTA GA 30339
Richard Jr Cox	director	2999 WILDWOOD PARKWAY, ATLANTA GA 30339
Paul D Donahue	director, officer: Chairman and CEO	214 N TRYON STREET, CHARLOTTE NC 28202
Loudermilk Robert C Jr	director	309 E. PACES FERRY RD N.E., ATLANTA GA 30305-2377
Darren M Rebelez	director	1722 ROUTH STREET, SUITE 1000, DALLAS TX 75201-2502
Naveen Krishna	officer: EVP, CIDO	2999 WILDWOOD PKWY, ATLANTA GA 30339
Christopher T Galla	officer: SVP and General Counsel	2999 WILDWOOD PKWY, ATLANTA GA 30339
Wood E Jenner Iii	director	SUNTRUST BANKS INC, P O BOX 4418 MC643, ATLANTA GA 30302