WELL (Welltower) Predictability Rank

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What is Welltower 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.

Welltower 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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Welltower Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Welltower Inc (NYSE:WELL) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

WELL:Mexico 0LUS:UK HCW:Germany HCW:Germany W1EL34:Brazil

Address

4500 Dorr Street, Toledo, OH, USA, 43615

Website

http://www.welltower.com

Welltower owns a diversified healthcare portfolio of 2,137 in-place properties spread across the senior housing, medical office, and skilled nursing/post-acute care sectors. The portfolio includes over 100 properties in both Canada and the United Kingdom as the company looks for additional investment opportunities in countries with mature healthcare systems that operate similarly to that of the United States.

Executives

Kenneth J Bacon	director	5404 WISCONSIN AVENUE, SUITE 410, CHEVY CHASE MD 20815
John F. Burkart	officer: EVP-Chief Operating Officer	C/O ESSEX PROPERTY TRUST INC., 1100 PARK PLACE, SUITE 200, SAN MATEO CA 94403
Ade J. Patton	director	4500 DORR STREET, TOLEDO DE 43515
Dennis G Lopez	director	12700 HILL COUNTRY BOULEVARD, SUITE T-200, AUSTIN TX 78738
Philip L Hawkins	director	C/O CORPORATE OFFICE PROPERTIES TRUST, 6711 COLUMBIA GATEWAY DRIVE, #300, COLUMBIA MD 21046
Diana Reid	director	4500 DORR STREET, TOLEDO OH 43615
Ayesha Menon	officer: SVP - Strategic Investments	4500 DORR STREET, TOLEDO OH 43615
Timothy Mchugh	officer: SVP - Chief Financial Officer	4500 DORR STREET, TOLEDO OH 43515
Thomas J Derosa	director	C/O WELLTOWER INC., 4500 DORR STREET, TOLEDO OH 43615
John Goodey	officer: Chief Financial Officer	4500 DORR STREET, TOLEDO OH 43615
Mercedes Kerr	officer: EVP-Business Development	2449 GRIVEL PLACE, TUSTIN CA 92782
Kathryn M Sullivan	director	PO BOX 98029, BATON ROUGE LA 70898-9029
Karen B Desalvo	director	500 W MAIN STREET, LOUISVILLE KY 40202
Johnese Spisso	director	4500 DORR STREET, TOLEDO OH 43615
Shankh Mitra	officer: SVP, Finance & Investments	4500 DORR STREET, TOLEDO OH 43615