Ambac Financial Group (Ambac Financial Group) Predictability Rank

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What is Ambac Financial Group 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.

Ambac Financial Group 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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Ambac Financial Group (Ambac Financial Group) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Insurance » Ambac Financial Group Inc (NYSE:AMBC) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

FGPN:Germany FGPN:Germany

Address

One World Trade Center, New York, NY, USA, 10007

Website

https://www.ambac.com

Ambac Financial Group Incis a financial services holding company. The business operations of the company include Legacy Financial Guarantee Insurance, Specialty Property and Casualty Insurance and Insurance Distribution. The Company has three reportable segments namely Legacy Financial Guarantee Insurance, Specialty Property and Casualty Insurance and Insurance Distribution. Majority of revenues are earned from Legacy Financial Guarantee Insurance segment.

Executives

Claude Leblanc	director, officer: Chief Executive Officer	ONE BERMUDIANA ROAD, HAMILTON D0 HM 11
Kristi Ann Matus	director	C/O EQUITABLE HOLDINGS, INC., 1290 AVENUE OF THE AMERICAS, NEW YORK NY 10104
Michael D Price	director	67 ORCHARD DRIVE, NEW CANAAN CT 06840
C James Prieur	director
Lisa G Iglesias	director	1 FOUNTAIN SQUARE, LAW DEPT. 7S730, CHATTANOOGA TN 37402
David Trick	officer: Sr. MD., CFO & Treasurer	AMBAC FINANCIAL GROUP, INC., ONE STATE STREET PLAZA, NEW YORK NY 10004
Daniel Mcginnis	officer: Sr. MD & COO	C/O AMBAC FINANCIAL GROUP, INC., ONE WORLD TRADE CENTER, 41ST FLOOR, NEW YORK NY 10007
R Sharon Smith	officer: Senior Managing Director	ONE STATE STREET PLAZA, NEW YORK NY 10004
Robert Bryan Eisman	officer: Sr. MD & CAO	AMBAC FINANCIAL GROUP INC., ONE STATE STREET PLAZA, NEW YORK NY 10004
Jeffrey Scott Stein	director	601 TRAVIS, SUITE 1400, HOUSTON TX 77002
Stephen Michael Ksenak	officer: Sr. MD & General Counsel	AMBAC FINANCIAL GROUP, INC., ONE STATE STREET PLAZA, NEW YORK NY 10004
Joan M Lammtennant	director	40 WANTAGE AVE, BRANCHVILLE NJ 07890
David Barranco	officer: Senior Managing Director	C/O AMBAC FINANCIAL GROUP INC, ONE STATE STREET PLAZA, NEW YORK NY 10004
Tavakoli Nader	director	551 FIFTH AVE 334TH FL, NEW YORK NY 10176
Alexander David Greene	director	3200 INDUSTRIAL PARK ROAD, VAN BUREN AR 72956