HSBC USA (HSBC USA) Predictability Rank

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What is HSBC USA 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.

HSBC USA 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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HSBC USA (HSBC USA) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Banks » HSBC USA Inc (NYSE:HUSIPRFCL.PFD) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.us.hsbc.com

HSBC USA Inc is a national banking association. The Company through HSBC Bank USA offers commercial and consumer banking products and related financial services. Its customers include individuals, small businesses, institutions and governments.

Executives

Stuart A Alderoty	officer: Sr Ex V.P. and General Counsel	C/O CIT GROUP INC. 11 WEST 42ND STREET NEW YORK NY 10036
Jane Cecile Sherburne	director	ONE WALL STREET, NEW YORK NY 10286
Robert Herdman	director	ONE WILLIAMS CENTER, SUITE 3800, TULSA OK 74172
Mark Alan Zaeske	officer: SEVP and CFO	2500 LAKE COOK ROAD, RIVERWOODS IL 60015
Thomas K Whitford	director	249 FIFTH AVE, P1-POPP-30-1, PITTSBURGH PA 15222
Gregory T Zeeman	officer: EVP and Chief Operating Off	C/O HSBC NORTH AMERICA, 26525 N. RIVERWOODS BLVD., METTAWA IL 60045
Eric K Ferren	officer: Exec VP & Chief Acctg Officer	C/O THE ALLSTATE CORPORATION, 2775 SANDERS ROAD, NORTHBROOK IL 60062
Lisa M Sodeika	officer: EVP-Communications	C/O DEVRY EDUCATION GROUP, 3005 HIGHLAND PARKWAY, DOWNERS GROVE IL 60515
John T Mcginnis	officer: SEVP and CFO	C/O MANPOWERGROUP INC., 100 MANPOWER PLACE, MILWAUKEE WI 53212
Kevin M Blakely	director	HUNTINGTON CENTER, 41 S. HIGH STREET, COLUMBUS OH 43287
Gary E Peterson	officer: SEVP, Chief Compliance Officer	C/O HSBC BANK USA, N.A., 11 WEST 42ND STREET, NEW YORK NY 10036
Patrick A Cozza	officer: SEVP, Reg Head of Insurance	C/O HSBC INSURANCE, 545 WASHINGTON BLVD, JERSEY CITY NJ 07310
Louis Jr Hernandez	director	AVID, 75 NETWORK DRIVE, BURLINGTON MA 01803
Mary E Bilbrey	officer: EVP, Hd of Human Resources USA	C/O HSBC NORTH AMERICA HOLDINGS INC., 452 FIFTH AVENUE NY 10018
Nancy G. Mistretta	director	14111 SCOTTSLAWN ROAD, MARYSVILLE OH 43041

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