RS (Reliance) Predictability Rank

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What is Reliance 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.

Reliance 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

Reliance Predictability Rank Related Terms

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Reliance Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Steel » Reliance Inc (NYSE:RS) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

RS6:Germany

Address

16100 N. 71st Street, Suite 400, Scottsdale, AZ, USA, 85254

Website

https://www.reliance.com

Reliance Inc is a diversified metal solutions provider and metals service center company. It provides value-added metals processing services and distributes.

Executives

Karla R Lewis	director, officer: President	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Arthur Ajemyan	officer: VP, CFO	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Smith William A Ii	officer: SVP, General Counsel, Corp Sec	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Mark V Kaminski	director	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Stephen Paul Koch	officer: Sr. VP, Operations	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
James Donald Hoffman	director, officer: CEO	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Michael R Hynes	officer: Sr. VP, Operations	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Jeffrey Wayne Durham	officer: Sr. VP, Operations	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Sean Michael Mollins	officer: SVP, Operations	350 SOUTH GRAND AVENUE, SUITE 5100, LOS ANGELES CA 90071
Karen Winifred Colonias	director	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
John G. Figueroa	director	350 SOUTH GRAND AVENUE, SUITE 5100, LOS ANGELES CA 90071
Robert Ambrose Mcevoy	director	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Lisa Baldwin	director	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
David W Seeger	director	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254
Douglas Stotlar	director	C/O RELIANCE STEEL & ALUMINUM CO., 16100 N. 71ST STREET, SUITE 400, SCOTTSDALE AZ 85254