H&E Equipment Services (H&E Equipment Services) Predictability Rank

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What is H&E Equipment Services 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.

H&E Equipment Services 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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H&E Equipment Services (H&E Equipment Services) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Business Services » H&E Equipment Services Inc (NAS:HEES) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

H6P:Germany

Address

7500 Pecue Lane, Baton Rouge, LA, USA, 70809

Website

https://www.he-equipment.com

H&E Equipment Services Inc is an integrated equipment services company. It is focused on heavy construction and industrial equipment. It rents, sells, and provides parts and services support for four core categories of equipment including hi-lift or aerial work platform equipment, cranes, earthmoving equipment, and industrial lift trucks. It engages in five principal business activities: equipment rentals; new equipment sales; used equipment sales; parts sales; and repair and maintenance services. The majority of its revenue is derived from the equipment rentals segment.

Executives

Suzanne H Wood	director	1200 URBAN CENTER DRIVE, BIRMINGHAM AL 35242
John Mcdowell Engquist	officer: President & COO	7500 PECUE LANE, BATON ROUGE LA 70809
Gary W Bagley	director	H&E EQUIPMENT SERVICES, 4899 WEST 2100 SOUTH, SALT LAKE CITY UT 84120
Jacob Thomas	director	840 CRESCENT CENTRE DR, STE 600, FRANKLIN TN 37067
Paul Arnold	director	C/O CORT BUSINESS SERVICE CORP, 4401 FAIR LAKES COURT, FAIRFAX VA 22033
Bradley W Barber	director, officer: CEO & President	H&E EQUIPMENT SERVICES, 11100 MEAD ROAD, SUITE 200, BATON ROUGE LA 70816
Patrick Edsell	director
Lawrence C Karlson	director	C/O CDI CORP., 1717 ARCH ST 35TH FLOOR, PHILADELPHIA PA 19103-2768
John Sawyer	director	PENHALL CO., 1801 PENHALL WAY/ POB 4609, ANAHEIM CA 92803
Thompson Mary Patricia B	director	651 S. STRATFORD DRIVE, SUITE 100, MERIDIAN ID 83642
Bruce Bruckmann	director	C/O MOHAWK INDUSTRIES INC, P O BOX 12069, CALHOUN GA 30703
John Engquist	director, 10 percent owner, officer: CEO & President	H&E EQUIPMENT SERVICES, 11100 MEAD ROAD, SUITE 200, BATON ROUGE LA 70816
Leslie S Magee	officer: CFO & Secretary	H&E EQUIPMENT SERVICES, 11100 MEAD ROAD, SUITE 200, BATON ROUGE LA 70816
John D Jones	officer: V.P., Product Support	H&E EQUIPMENT SERVICES, 11100 MEAD ROAD, SUITE 200, BATON ROUGE LA 70816
William W Fox	officer: V.P., Cranes & Earthmoving	H&E EQUIPMENT SERVICES, 11100 MEAD ROAD, SUITE 200, BATON ROUGE LA 70816