LendingClub (LendingClub) Predictability Rank

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What is LendingClub 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.

LendingClub 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

LendingClub Predictability Rank Related Terms

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LendingClub (LendingClub) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Credit Services » LendingClub Corp (NYSE:LC) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

8LCA:Germany

Address

595 Market Street, Suite 200, San Francisco, CA, USA, 94105

Website

https://www.lendingclub.com

LendingClub Corp is a company engaged in operating an online lending marketplace platform that connects borrowers and investors for the provision of the loan facility. It offers investors access to an asset class that has generally been closed to many investors and only available on a limited basis to institutional investors. The company through the platform offers loan products such as personal, education and patient finance, small business, and auto to interested investors. It generates a majority of the revenue from the transaction fees received from the platform's role in accepting and decisioning applications on behalf of the bank partners to enable loan originations.

Executives

Michael P Zeisser	director
Janey Whiteside	director	C/O LENDINGCLUB CORPORATION, 595 MARKET ST., #200, SAN FRANCISCO CA 94105
Kathryn Reimann	director	C/O LENDINGCLUB CORPORATION, 595 MARKET ST., #200, SAN FRANCISCO CA 94105
Syed Faiz Ahmad	director	7601 SOUTHWEST PARKWAY, AUSTIN TX 78735
Stephen M Cutler	director	JPMORGAN CHASE & CO., 270 PARK AVENUE, NEW YORK NY 10017
John C. Morris	director	C/O VISA INC., P.O. BOX 8999, SAN FRANCISCO CA 94128-8999
Andrew Labenne	officer: Chief Financial Officer	C/O BAKKT HOLDINGS, INC., 5500 WINDWARD PKWY., SUITE 450, ALPHARETTE GA 30005
Timothy J Mayopoulos	director	C/O FANNIE MAE, 1100 15TH STREET, NW, WASHINGTON DC 20005
Erin Selleck	director	C/O BROADWAY FINANCIAL CORPORATION, 5055 WILSHIRE BLVD. SUITE 500, LOS ANGELES CA 90036
Allan R Landon	director	130 MERCHANT ST 22ND FLR, HONOLULU HI 96813
Fergal Stack	officer: SVP, Corporate Controller	C/O LENDINGCLUB CORPORATION, 71 STEVENSON ST., SUITE 300, SAN FRANCISCO CA 94105
Scott Sanborn	officer: Chief Mrktg & Optg Officer	C/O REDENVELOPE, INC., 149 NEW MONTGOMERY STREET, SAN FRANCISCO CA 94105
Jordan Cheng	officer: General Counsel & Secretary	C/O LENDINGCLUB CORPORATION, 595 MARKET ST., #200, SAN FRANCISCO CA 94105
Brandon Pace	officer: General Counsel and Secretary	C/O LENDINGCLUB CORPORATION, 595 MARKET ST, SUITE 200, SAN FRANCISCO CA 94105
Annie Armstrong	officer: Chief Risk Officer	C/O LENDINGCLUB CORPORATION, 595 MARKET ST. #200, SAN FRANCISCO CA 94105