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NLST (Netlist) Predictability Rank


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What is Netlist Predictability Rank?

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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.


Netlist 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

PredictablesNon-PredictableAll stocks
Total Number of stocks57018332403
Total Lost Money61830891
Total Lost More Than 50%18412430
Total Lost More Than 90%48690
Average Gain260.6%100.0%138.1%
Median Gain150.0%13.0%39.0%
Maximum Gain2852.0%11483.0%11483.0%
Maximum Loss-100.0%-100.0%-100.0%
Annualized Average Gain12.7%6.7%8.4%
Annualized Median Gain8.9%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 Rank5-Star4.5-Star4-Star3.5-Star3-Star2.5-Star2-Star1-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

Also read:

Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety

Netlist Predictability Rank Related Terms

Thank you for viewing the detailed overview of Netlist's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.


Netlist Business Description

Traded in Other Exchanges
Address
111 Academy, Suite 100, Irvine, CA, USA, 92617
Netlist Inc is involved in the business of designing and manufacturing modular memory subsystems and also cloud service providers. Its products include Storage class memory, nonvolatile memory, enterprise SSD and embedded flash. The company's products are based on its proprietary technologies such as Presight technology, Distributed buffer architecture, IC design, PCB designs, Thermal management designs.
Executives
Gail Misako Itow officer: Vice President and CFO C/O NETLIST, INC., 51 DISCOVERY, STE 150, IRVINE CA 92618
Chun K Hong director, 10 percent owner, officer: President,CEO & Chairman C/O NETLIST, INC., 51 DISCOVERY, STE 150, IRVINE CA 92618
Kiho Choi director 3435 WILSHIRE BLVD., SUITE 2240, LOS ANGELES CA 90010
Jeff Benck director BENCHMARK ELECTRONICS, INC., 56 SOUTH ROCKFORD DRIVE, TEMPE AZ 85281
Vince Sheeran director 175 TECHNOLOGY DRIVE, IRVINE CA 92618
Jun Cho director C/O NETLIST, INC., 475 GODDARD, IRVINE CA 92618
Blake Welcher director 5220 LAS VIRGENES ROAD, CALABASAS CA 91302
Charles F Cargile director C/O SUNWORKS, INC., 1010 WINDING CREEK ROAD, SUITE 100, ROSEVILLE CA 95678
Hk Desai director 26650 ALISO VIEJO PARKWAY, ALISO VIEJO CA 92656
Claude M Leglise director 875 MAHLER RD, STE 280, BURLINGAME CA 94010
Richard Char director 45 WEST 36TH STREET, NEW YORK NY 10018
Thomas F Lagatta director MARVELL SEMICONDUCTOR, INC., 5488 MARVELL LANE, SANTA CLARA CA 95054
Alan H Portnoy director C/O NETLIST, INC., 475 GODDARD, IRVINE CA 92618
Nam Ki Hong director C/O NETLIST, INC., 475 GODDARD, IRVINE CA 92618
James Patrick Perrott officer: SVP of Sales and Marketing 51 DISCOVERY, IRVINE CA 92618