Community Bank System (Community Bank System) Predictability Rank

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What is Community Bank System 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.

Community Bank System 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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Community Bank System (Community Bank System) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Banks » Community Bank System Inc (NYSE:CBU) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

CBY:Germany

Address

5790 Widewaters Parkway, DeWitt, NY, USA, 13214-1883

Website

https://www.cbna.com

Community Bank System Inc is a financial holding company. The company primarily operates through two wholly-owned subsidiaries: Community Bank, N.A. and Benefit Plans Administrative Services. Community Bank's business is operating a community bank providing a broad array of banking and financial services. These are offered chiefly to retail, commercial, and municipal customers in non-metropolitan markets, including small towns in upstate New York and Northeastern Pennsylvania. The company has historically relied on acquisitions to fuel growth, in addition to growing organically. A majority of its loan portfolio is tilted toward the consumer market on an installment, line of credit, or residential mortgage loan basis. The majority of the company's net revenue is net interest income.

Executives

Sally A Steele	director
Jeffrey M Levy	officer: President, Commercial Banking	52 SOUTH BROAD STREET, NORWICH NY 13815
Brian R Ace	director
Dimitar Karaivanov	officer: EVP Financial Serv & Corp Dev	C/O COMMUNITY BANK SYSTEM, INC., 5790 WIDEWATERS PARKWAY, DEWITT NY 13214
Kerrie D. Macpherson	director	5790 WIDEWATERS PARKWAY, C/O COMMUNITY BANK SYSTEM INC., DEWITT NY 13214
Mark J. Bolus	director	R.R. 1, BOX 412A, DALTON PA 18414
John F. Whipple	director	1692 GOODRICH AVENUE, OLEAN NY 14760
Michael N Abdo	officer: EVP and General Counsel	5790 WIDEWATERS PARKWAY, DEWITT NY 13214
Jeffrey J Knauss	director	2438 EAST LAKE ROAD, SKANEATELES NY 13152
George J Getman	officer: Executive VP & General Counsel	7856 CAHILL ROAD, MANLIUS NY 13104
Maureen A Gillan-myer	officer: EVP, Chief Human Resources Off	C/O HSBC NORTH AMERICA, 452 FIFTH AVENUE, NEW YORK NY 10018
John Parente	director	478 SCHOOLHOUSE ROAD, TUNKHANNOCK PA 18657
Joseph Jonathon Lemchak	officer: SVP, Chief Investment Officer	4482 YOUNG ROAD, SYRACUSE NY 13215
Eric Stickels	director	182 MAIN STREET, ONEIDA NY 13421
Susan E Skerritt	director	3200 NORTHLINE AVE, SUITE 360, GREENSBORO NC 27408