1 (5)
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.
Tellurian 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
Tellurian (Tellurian) Business Description
Traded in Other Exchanges
Address
1201 Louisiana Street, Suite 3100, Houston, TX, USA, 77002
Tellurian Inc is a U.S-based independent oil and gas exploration and production company. It is developing a portfolio of natural gas production, LNG marketing, and infrastructure assets that includes an LNG terminal facility and related pipelines. The company generates maximum revenue from Natural gas sales.
Executives
| Jonathan S Gross |
director |
5233 BELLAIRE BOULEVARD, SUITE B - BOX 135, BELLAIRE TX 77401 |
| Simon George Oxley |
officer: CFO |
1201 LOUISIANA STREET, SUITE 3100, HOUSTON TX 77002 |
| Charif Souki |
director, 10 percent owner |
700 MILAM ST., SUITE 800, HOUSTON TX 77002 |
| Claire Harvey |
director |
510 MADISON AVENUE, 8TH FLOOR, NEW YORK NY 10022 |
| James Donald Bennett |
director |
700 LOUISIANA, SUITE 4770, HOUSTON TX 77002 |
| Diana Derycz Kessler |
director |
6363 SUNSET BLVD, 5TH FL, HOLLYWOOD CA 90028 |
| Total Delaware, Inc. |
10 percent owner |
1201 LOUISIANA STREET, SUITE 1800, HOUSTON TX 77002 |
| Simoes Octavio M.c. |
officer: President and CEO |
1201 LOUISIANA STREET, SUITE 3100, HOUSTON TX 77002 |
| Jean Abiteboul |
director |
700 MILAM STREET, SUITE 800, HOUSTON TX 77002 |
| Lance Kian Granmayeh |
officer: CFO |
1201 LOUISIANA STREET, SUITE 3100, HOUSTON TX 77002 |
| Martin Houston |
director, 10 percent owner |
1201 LOUISIANA STREET, SUITE 3100, HOUSTON TX 77002 |
| Don A Turkleson |
director |
717 TEXAS AVENUE, SUITE 3100, HOUSTON TX 77002 |
| Festa Eric |
director |
10 UPPER BANK STREET, CANARY WHARF, LONDON X0 E14 5BF |
| Meg Gentle |
director, officer: President and CEO |
717 TEXAS AVENUE, SUITE 3100, HOUSTON TX 77002 |
| Khaled Sharafeldin |
officer: Chief Accounting Officer |
1201 LOUISIANA STREET, SUITE 3100, HOUSTON TX 77002 |
Quick Browse
Personalize
Premium Gurus 
Create New Portfolio
Portfolio Contest
TELL has been successfully added to your