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AeroVironment (AeroVironment) 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.


AeroVironment 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

PredictablesNon-PredictableAll stocks
Total Number of stocks57018332403
Total Lost Money61830891
Total Lost More Than 50%18412430
Total Lost More Than 90%48690
Average Gain260.6%100.0%138.1%
Median Gain150.0%13.0%39.0%
Maximum Gain2852.0%11483.0%11483.0%
Maximum Loss-100.0%-100.0%-100.0%
Annualized Average Gain12.7%6.7%8.4%
Annualized Median Gain8.9%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 Rank5-Star4.5-Star4-Star3.5-Star3-Star2.5-Star2-Star1-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

AeroVironment Predictability Rank Related Terms

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AeroVironment (AeroVironment) Business Description

Traded in Other Exchanges
Address
241 18th Street South, Suite 415, Arlington, VA, USA, 22202
AeroVironment Inc operates under a single business segment in which it supplies unmanned aircraft systems, tactical missile systems, high-altitude pseudo-satellites, and other related services to government agencies within the United States Department of Defense as well as the United States allied international governments. The systems can help with security, surveillance, or sensing, and provide "eyes in the sky" without needing an actual person, or driver, in the sky.
Executives
Mary Beth Long director 309 FRANKLIN STREET, ALEXANDRIA VA 22314
Brian Charles Shackley officer: Chief Accounting Officer 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Cindy Kay Lewis director 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Trace E Stevenson officer: Sr. VP 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Brett P Hush officer: Sr. VP 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Jeff E Rodrian officer: Sr. VP 900 INNOVATORS WAY, SIMI VALLEY CA 93063
Phillip S Davidson director 825 TOWN & COUNTRY LANE, SUITE 1500, HOUSTON TX 77024
Kevin Patrick Mcdonnell officer: Chief Financial Officer 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Stephen F Page director C/O AEROVIRONMENT, INC., 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Edward R Muller director C/O AEROVIRONMENT, INC., 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Charles Thomas Burbage director C/O AEROVIRONMENT, INC., 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Charles R Holland director C/O AEROVIRONMENT, INC., 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Melissa Ann Brown officer: VP, Gen. Counsel, Corp. Sec. 800 ROYAL OAKS DRIVE, SUITE 210, MONROVIA CA 91016
Alison Marie Roelke officer: VP People & Culture 900 INNOVATORS WAY, SIMI VALLEY CA 93065
Timothy E Conver director, 10 percent owner, officer: President and CEO 900 INNOVATORS WAY, SIMI VALLEY CA 93065

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