RBC (RBC Bearings) Predictability Rank

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What is RBC Bearings 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.

RBC Bearings 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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RBC Bearings Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » RBC Bearings Inc (NYSE:RBC) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

B1X:Germany

Address

One Tribology Center, Oxford, CT, USA, 06478

Website

https://www.rbcbearings.com

RBC Bearings Inc is an international manufacturer and marketer of highly engineered precision bearings, components and essential systems for the industrial, defense and aerospace industries. The offering includes plain bearings, roller bearings, ball bearings, and engineered products. The end market is the United States of America. The company has two reportable segments: Aerospace Defense segment represents the end markets for the company's highly engineered bearings and precision components used in commercial aerospace, defense aerospace, and sea and ground defense applications; and Industrial segment represents the end markets for the company's engineered bearings and precision components used in various industrial applications. It derives maximum revenue from Industrial Segment.

Executives

Michael J Hartnett	officer: President and CEO	RBC BEARINGS, INC., 102 WILLENBROCK ROAD, ONE TRIBOLOGY CENTER, OXFORD CT 06478
Robert M Sullivan	officer: Corporate Controller	103 STILLWOLD DRIVE, WETHERSFIELD CT 06109
Michael H. Ambrose	director	ONE TRIBOLOGY CENTER, 102 WILLENBROCK ROAD, OXFORD CT 06478
Daniel A Bergeron	officer: VP and CFO
Dolores J Ennico	director	RBC BEARINGS INCORPORATED, ONE TRIBOLOGY CENTER, OXFORD CT 06478
John J. Feeney	officer: Vice President and Secretary	ONE TRIBOLOGY CENTER, 102 WILLENBROCK ROAD, OXFORD CT 06478
Edward Stewart	director	5715 EAST CHENEY DRIVE, PARADISE VALLEY AZ 85253
Richard J Edwards	officer: V.P. and General Manager	RBC BEARINGS INCORPORATED, ONE TRIBOLOGY CENTER, OXFORD CT 06478
Steven H. Kaplan	director	11 LINDEN SHORES, BRANFORD CT 06405
Richard R Crowell	director	AURORA CAPITAL PARTNERS LP, 10877 WILSHIRE BOULEVARD SUITE 2100, LOS ANGELES CA 90024
Patrick S. Bannon	officer: V.P. and General Manager	131 WOODS WAY DRIVE, SOUTHBURY CT 06488
Alan B Levine	director
Ernest D Hawkins	officer: Vice President of Finance	102 WILLENBROCK ROAD, OXFORD CT 06478
Amir Faghri	director	RBC BEARINGS INCORPORATED, ONE TRIBOLOGY CENTER, OXFORD CT 06478
Joseph Salamunovich	officer: General Counsel and Secretary	RBC BEARINGS INCORPORATED, ONE TRIBOLOGY CENTER, OXFORD CT 06478