KapStone Paper And Packaging (KapStone Paper And Packaging) Predictability Rank

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What is KapStone Paper And Packaging 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.

KapStone Paper And Packaging 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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KapStone Paper And Packaging (KapStone Paper And Packaging) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Forest Products » KapStone Paper And Packaging Corp (NYSE:KS) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.kapstonepaper.com

KapStone Paper and Packaging Corp produces and sells containerboard, corrugated products, and specialty paper. The company organizes itself into two segments based on function: paper and packaging and distribution. The paper and packaging segment, which generates the majority of revenue, sells packaging products primarily to food and beverage manufacturers and retailers. The segment also sells specialty paper products. The distribution segment operates a packaging materials distribution business under the Victory and Golden State Container trade names. The vast majority of revenue comes from the United States.

Executives

Paula H Cholmondeley	director	221 W PHILADELPHIA ST, SUITE 60W, YORK PA 17401-2991
Matthew H Paull	director	MCDONALDS CORP, 2915 JORIE BLVD, OAK BROOK IL 60523
Roger W Stone	director, officer: Executive Chairman	KAPSTONE PAPER & PKG. CORP., 1101 SKOKIE BOULEVARD, STE 300, NORTHBROOK IL 60062-6141
Robert J Bahash	director	1221 AVENUE OF THE AMERICAS, NEW YORK NY 10020
David P Storch	director	C/O AAR CORP, 1111 NICHOLAS BLVD, 1111 NICHOLAS BLVD IL 60007
Kathryn D. Ingraham	officer: VP, Secy & Gen Counsel	KAPSTONE PAPER AND PACKAGING CORPORATION, 1101 SKOKIE BLVD., STE. 300, NORTHBROOK IL 60062
Brian R Gamache	director
Randy J. Nebel	officer: Exec. VP. Integrated Packaging	KAPSTONE PAPER AND PACKAGING CORP. 1101 SKOKIE BLVD., SUITE 300 NORTHBROOK IL 60062
Andrea K Tarbox	officer: Exec. VP and CFO	ONE NORTHFIELD PLAZA, STE. 480, NORTHFIELD IL 60093
Maurice S Reznik	director	C/O MAIDENFORM BRANDS, INC., 154 AVENUE E, BAYONNE NJ 07002
Jonathan R Furer	director	45 PARK STREET, TENAFLY NJ 07670
S Jay Stewart	director	100 NORTH RIVERSIDE PLAZA, CHICAGO IL 60606
Harvey Hanerfeld	10 percent owner	1919 PENNSYLVANIA AVENUE NW, SUITE 725, WASHINGTON DC 20006
Ned L Sherwood	10 percent owner	54 MORRIS LN, SCARSDALE NY 10583
Jonathan M Glaser	10 percent owner	11601 WILSHIRE BLVD., SUITE 2180, LOS ANGELES CA 90025