Apollo Residential Mortgage (Apollo Residential Mortgage) Predictability Rank

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Not Rated

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.

Apollo Residential Mortgage 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

Apollo Residential Mortgage Predictability Rank Related Terms

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Apollo Residential Mortgage (Apollo Residential Mortgage) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Apollo Residential Mortgage Inc (NYSE:AMTGPRA.PFD) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

Website

http://www.apolloresidentialmortgage.com

Apollo Residential Mortgage Inc was incorporated in Maryland on March 15, 2011 and began operations on July 27, 2011, coinciding with the initial public offering of its common stock. The Company is a real estate investment trust mainly engaged in investing and managing residential mortgage-backed securities, residential mortgage loans and other residential mortgage assets in the United State. It is structured as a holding company and conducts its business mainly through ARM Operating, LLC and its other operating subsidiaries. The Company is an alternative investment manager. It currently operates as one business segment. The Company competes with other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, financial institutions, governmental bodies and other entities.

Executives

Gregory W. Hunt	officer: CFO, Treasurer and Secretary	730 5TH AVENUE, NEW YORK NY 10019
James Galowski	director	C/O APOLLO GLOBAL MANAGEMENT, LLC, 9 WEST 57TH STREET, 43RD FLOOR, NEW YORK NY 10019
Teresa D Covello	officer: CFO, Treasurer and Secretary	C/O MFA MORTGAGE INVESTMENTS, INC., 350 PARK AVENUE, 21ST FLOOR, NEW YORK NY 10022
Michael A Commaroto	officer: CEO and President	C/O APOLLO GLOBAL MANAGEMENT, LLC, 9 WEST 57TH STREET, NEW YORK NY 10019
Stuart Rothstein	officer: CFO,Treasurer & Secretary	2180 SAND HILL RD, STE 200, MENLO PARK CA 94025
Thomas Christopoul	director	RESOURCES CONNECTION INC, 17101 ARMSTRONG AVENUE, IRVINE CA 92614
Hope S Taitz	director	C/O ATHENE HOLDING LTD., WASHINGTON HOUSE, 16 CHURCH STREET, HAMILTON D0 HM 11
Fred J Kleisner	director	C/O MORGANS HOTEL GROUP CO., 475 TENTH AVENUE, NEW YORK NY 10018
Frederick N Khedouri	director	C/O APOLLO GLOBAL MANAGEMENT, LLC, 9 WEST 57TH STREET, 43RD FLOOR, NEW YORK NY 10019
Mark C Biderman	director	NATIONAL FINANCIAL PARTNERS CORP, 340 MADISON AVENUE, 19TH FL, NEW YORK NY 10173
Marc Becker	director	C/O APOLLO MANAGEMENT LP, 1301 AVENUE OF THE AMEICAS 38TH FL, NEW YORK NY 10019
Justin Stevens	director	C/O APOLLO GLOBAL MANAGEMENT, LLC, 9 WEST 57TH STREET, 43RD FLOOR, NEW YORK NY 10019

Apollo Residential Mortgage (Apollo Residential Mortgage) Headlines

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