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Allstate Predictability Rank


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5 (5)

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.


Allstate 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

Allstate Predictability Rank Related Terms

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


Allstate Business Description

Allstate logo
Address
2775 Sanders Road, Northbrook, IL, USA, 60062
On the basis of premium sales, Allstate is one of the largest U.S. property and casualty insurers. Personal auto represents the largest percentage of revenue, but the company offers homeowners insurance and other insurance products. Allstate products are sold in North America primarily by about 10,000 company agencies.
Executives
Williams Terrance officer: AIC-President Protec Prod&Svcs 7184 BIDDICK NEW ALBANY OH 43054
Toohey Robert officer: EVP, Chief HR Officer - AIC 2775 SANDERS ROAD NORTHBROOK IL 60062
Brown Donald Eugene director 801 E. 86TH AVENUE MERRILLVILLE IN 46410
Ferguson Rhonda S officer: EVP & General Counsel 1400 DOUGLAS ST OMAHA NE 68179
Hume Richard T director 5350 TECH DATA DRIVE CLEARWATER FL 33760
Prindiville Mark Q other: EVP & Chief Risk Officer - AIC 2775 SANDERS ROAD NORTHBROOK IL 60062
Blair Carolyn D other: EVP, Chief HR Officer - AIC 2775 SANDERS ROAD NORTHBROOK IL 60062
Pintozzi John C officer: SVP, Controller, and CAO 2775 SANDERS ROAD NORTHBROOK IL 60062
Brady Elizabeth other: Executive Vice President - AIC 2775 SANDERS ROAD NORTHBROOK IL 60062
Rizzo Mario officer: EVP & Chief Financial Officer 2775 SANDERS ROAD NORTHBROOK IL 60062
Shapiro Glenn T other: Pres Allstate Personal Lines 2775 SANDERS ROAD NORTHBROOK IL 60062
Keane Margaret M director 777 LONG RIDGE ROAD SYNCHRONY FINANCIAL C/O CORP. SECRETARY STAMFORD CT 06902
Merten Jesse E officer: EVP & Chief Risk Officer (AIC) 2775 SANDERS ROAD NORTHBROOK IL 60062
Sherrill Gregg M director 5757 N. GREEN BAY AVENUE P.O. BOX 591 MILWAUKEE WI 53201-0591
Ferren Eric K officer: SVP, Controller, and CAO C/O THE ALLSTATE CORPORATION 2775 SANDERS ROAD NORTHBROOK IL 60062

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