Professional Diversity Network (Professional Diversity Network) Predictability Rank

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What is Professional Diversity Network 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.

Professional Diversity Network 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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Professional Diversity Network (Professional Diversity Network) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Business Services » Professional Diversity Network Inc (NAS:IPDN) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

5MQ0:Germany

Address

55 East Monroe Street, Suite 2120, Chicago, IL, USA, 60603

Website

http://www.ipdnusa.com

Professional Diversity Network Inc is engaged in providing access to networking, training, educational and employment services to its registered users. It has three operating segments: the Professional Diversity Network (PDN) segment, which includes online professional networking communities with career resources for diverse cultural groups and employers looking to hire members; and the National Association of Professional Women (NAPW) segment, which is a women-only professional networking organization, the RemoteMore segment. The company generates revenues from paid membership subscriptions and related services, recruitment services, product sales, education & training, and consumer advertising & consumer marketing solutions.

Executives

Yu-jin Chou	officer: Secretary	55 E MONROE STREET, SUITE2120, CHICAGO IL 60603
Hongjun Chen	10 percent owner	55 E MONROE STREET, STE 2250, CHICAGO IL 60603
Larry S Aichler	officer: Interim CFO	55 E MONROE ST, STE 2120, CHICAGO IL 60603
Christopher Renn	director	55 E MONROE ST, SUITE# 2120, CHICAGO IL 60603
Esquivel Russell J Jr.	officer: SVP	26844 N 73RD DR, PEORIA AZ 85383
Megan Elizabeth Bozzuto	officer: SVP	162 EAST ST, SHARON MA 02067
Grace Reyes	director	1191 SOLANO AVENUE #6315, ALBANY CA 94706
Charles Martin Obrien	officer: Interim CFO	1131 WARWICK CIRCLE N., HOFFMAN ESTATES IL 60169
Malven Group Ltd	10 percent owner	UNIT A, 21/F., CMA BUILDING, 64 CONNAUGHT ROAD CENTRAL, CENTRAL K3 00000
Shea Courtney C.	director	1555 N. ASTOR STREET, APARTMENT 9W, CHICAGO IL 60610
Maoji Wang	director	13-1-902, BAIWANGJIAYUAN EAST SECTOR, DONGBEIWANG, HAIDIAN DISTRICT, BEIJING F4 000000
Lida Fang	director	77 N 3RD RING MIDDLE RD, 24TH FLOOR, ROOM 1105, BEIJING F4 100080
Haibin Gong	director	408 NO. 18 BLDG XILI MAJIABAO YANGQIAO, FENGTAI DISTRICT BEIJING CITY F4 100039
Michael D Belsky	director	213 LEONARD WOOD NORTH, UNIT 101, HIGHLAND PARK IL 60035
James R Kirsch	director, 10 percent owner, officer: Chief Executive Officer	801 W. ADAMS STREET SUITE 600, CHICAGO IL 60607