RC (Ready Capital) Predictability Rank

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What is Ready Capital 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.

Ready Capital 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

Ready Capital Predictability Rank Related Terms

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Ready Capital Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Ready Capital Corp (NYSE:RC) » Definitions » Predictability Rank

Comparable Companies

ORC RWT KREF BRSP TRTX CIM FBRT MFA NYMT DX NLY AGNC STWD RITM BXMT ABR LADR TWO ARR ARI

Traded in Other Exchanges

RCpC.PFD:USA 0SZ:Germany

Address

1251 Avenue of the Americas, 50th Floor, New York, NY, USA, 10020

Website

https://www.readycapital.com

Ready Capital Corp is a real estate finance company. It acquires, manages, originates, and finances small-balance commercial loans to purchase small multi-family, office, retail, mixed-use, or warehouse properties. The company's segments consist of LMM Commercial Real Estate and Small Business Lending. It generates the majority of its revenue from LMM Commercial Real Estate.

Executives

Andrew Ahlborn	officer: Chief Financial Officer	C/O READY CAPITAL CORPORATION, 1140 AVENUE OF THE AMERICAS, 7TH FLOOR, NEW YORK NY 10036
Gilbert E Nathan	director	C/O EMERGENT CAPITAL, INC., 5355 TOWN CENTER ROAD, SUITE 701, BOCA RATON FL 33486
Gary Taylor	officer: Chief Operating Officer	C/O READY CAPITAL CORPORATION, 1140 AVENUE OF THE AMERICAS, 7TH FLOOR, NEW YORK NY 10036
Adam Zausmer	officer: Chief Credit Officer	C/O READY CAPITAL CORPORATION, 1251 AVENUE OF THE AMERICAS, 50TH FLOOR, NEW YORK NY 10020
Thomas E Capasse	director, officer: Chairman of the Board and CEO	SUTHERLAND ASSET MANAGEMENT CORPORATION, 1185 AVENUE OF THE AMERICAS, 18TH FLOOR, NEW YORK NY 10036
Jack J. Ross	director, officer: President and Director	SUTHERLAND ASSET MANAGEMENT CORPORATION, 1185 AVENUE OF THE AMERICAS, 18TH FLOOR, NEW YORK NY 10036
Kevin M Luebbers	director	850 RIDGE LAKE BLVD, STE 300, MEMPHIS TN 38120
Pinkie Dent Mayfield	director	1420 FIFTH AVENUE, SUITE 2000, SEATTLE WA 98101
Daniel J. Hirsch	director	748 DIAMOND STREET, SAN FRANCISCO CA 94114
Dominique Mielle	director	C/O ANWORTH MORTGAGE ASSET CORPORATION, 1299 OCEAN AVENUE, SECOND FLOOR, SANTA MONICA CA 90401
Meredith Marshall	director	50 RIVERSIDE BLVD, APT 14C, NEW YORK NY 10069
Erving Julius W Ii	director	DR J ENTERPRISES LLC, 3355 LENOX ROAD NE SUITE 750, ATLANTA GA 30326
Andrea Petro	director	C/O READY CAPITAL CORPORATION, 1251 AVENUE OF THE AMERICAS, 50TH FL., NEW YORK NY 10020
J Mitchell Reese	director	210 MONTEREY DR. S., VERO BEACH FL 32963
Todd M. Sinai	director	C/O SUTHERLAND ASSET MANAGEMENT CORP, 1140 AVENUE OF THE AMERICAS, 7TH FLOOR, NEW YORK NY 10036