What is Universal Electronics 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.
Universal Electronics 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
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
Universal Electronics Business Description
Traded in Other Exchanges
N/A
Address
15147 N. Scottsdale Road, Suite H300, Scottsdale, AZ, USA, 85254-2494
Universal Electronics Inc is a United States-based company that principally designs, develops, manufactures, ships, and supports control and sensor technology solutions and a broad line of universal control systems, audio-video (AV) accessories, wireless security, and smart home products that are used by the world's brands in the video services, consumer electronics, security, home automation, climate control and home appliance markets. It generates its total revenue from the United States.
Executives
| Eric Singer |
10 percent owner |
323 SUNNY ISLES BLVD., SUITE 700, SUNNY ISLES BEACH FL 33160 |
| Firehammer Richard A Jr |
officer: Senior Vice Presiden |
201 E. SANDPOINTE AVENUE, 8TH FLOOR, SANTA ANA CA 92707 |
| Paul D Arling |
director, officer: CEO |
201 EAST SANDPOINTE, 8TH FLOOR, SANTA ANA CA 92707 |
| Edward K Zinser |
director |
201 EAST SANDPOINTE, 8TH FLOOR, SANTA ANA CA 92707 |
| Toro 18 Holdings Llc |
10 percent owner |
2999 N.E. 191ST STREET, SUITE 610, AVENTURA FL 33180 |
| William C Martin |
10 percent owner |
C/O RAGING CAPITAL MANAGEMENT, LLC, TEN PRINCETON AVENUE, PO BOX 228, ROCKY HILL NJ 08553 |
| Immersion Corp |
10 percent owner |
2999 N. E. 191ST STREET, SUITE 610, AVENTURA FL 33180 |
| Bryan M Hackworth |
officer: Vice President and CFO |
201 EAST SANDPOINTE, 8TH FLOOR, SANTA ANA CA 92707 |
| Chong David Cheung Hyen |
officer: Executive Vice President -Asia |
201 EAST SANDPOINTE AVENUE, 8TH FLOOR, SANTA ANA CA 92707 |
| Romulo Pontual |
director |
15147 N SCOTTSDALE ROAD, SUITE H300, SCOTTSDALE AZ 85254 |
| William C Mulligan |
director |
201 EAST SANDPOINTE, 8TH FLOOR, SANTA ANA CA 92707 |
| Richard K Carnifax |
officer: V.P. Global Operations |
15147 N. SCOTTSDALE ROAD, SUITE H300, SCOTTSDALE AZ 85254 |
| Satjiv S Chahil |
director |
201 EAST SANDPOINTE, 8TH FLOOR, SANTA ANA CA 92707 |
| Ramzi Ammari |
officer: Sr.VP Corp Planning & Strategy |
15147 N. SCOTTSDALE ROAD, SCOTTSDALE AZ 85268 |
| Joseph Miketo |
officer: Sr. VP Operations |
15147 N. SCOTTSDALE ROAD, SCOTTSDALE AZ 85254 |
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