Microsoft (Microsoft) Predictability Rank

View and export this data going back to 1986. Start your Free Trial

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.

Microsoft 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

Microsoft Predictability Rank Related Terms

Thank you for viewing the detailed overview of Microsoft's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.

Microsoft (Microsoft) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » Microsoft Corp (NAS:MSFT) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

MSFT:Peru MSFT:Mexico MSFT:Italy MSFd:UK 0QYP:UK MSF0:Germany MSF:Germany MSF:Germany MSF:Germany MSF:Germany MSFT:Chile MSFT:Canada MSFT34:Brazil MSFT:Austria MSFT:Argentina

Address

One Microsoft Way, Redmond, WA, USA, 98052-6399

Website

https://www.microsoft.com

Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).

Executives

Kathleen T Hogan	officer: EVP, Human Resources	C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
Judson Althoff	officer: EVP, Chief Commercial Officer	MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052
Satya Nadella	director, officer: Chief Executive Officer	C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
Bradford L Smith	officer: Executive Vice President	MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
Teri List	director	2200 PENNSYLVANIA AVENUE, SUITE 800W, WASHINGTON DC 20037
Christopher C Capossela	officer: EVP, Chief Marketing Officer	C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
Amy Hood	officer: Chief Financial Officer	C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
Emma N Walmsley	director	C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
Carlos A Rodriguez	director	10200 SUNSET DRIVE, MIAMI FL 33173
Christopher David Young	officer: EVP, Business Development	C/O MICROSOFT CORPORATION, ONE MICROSOFT WAY, REDMOND WA 98052-6399
John W Stanton	director	3650 131ST AVE SE #400, WESTERN WIRELESS CORP, BELLEVUE WA 98006
Charles W Scharf	director	C/O VISA INC., 900 METRO CENTER BLVD., FOSTER CITY CA 94404
Hugh F Johnston	director	PEPSICO, INC., 700 ANDERSON HILL ROAD, PURCHASE NY 10577
Reid Hoffman	director	C/O LINKEDIN CORPORATION, 2029 STIERLIN COURT, MOUNTAIN VIEW CA 94043
Sandra E Peterson	director	100 PARSONS POND DRIVE, FRANKLIN LAKES NJ 07417