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Penske Automotive Group Predictability Rank


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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.


Competitive Comparison

For the Auto & Truck Dealerships subindustry, Penske Automotive Group's Predictability Rank, along with its competitors' market caps and Predictability Rank data, can be viewed below:

* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap. Note that "N/A" values will not show up in the chart.

   

Penske Automotive Group Predictability Rank Distribution

For the Vehicles & Parts industry and Consumer Cyclical sector, Penske Automotive Group's Predictability Rank distribution charts can be found below:

* The bar in red indicates where Penske Automotive Group's Predictability Rank falls into.



Penske Automotive 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

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

Penske Automotive Group Predictability Rank Related Terms

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


Penske Automotive Group Business Description

Penske Automotive Group logo
Industry
Consumer Cyclical » Vehicles & Parts NAICS : 441110 SIC : 5511
Traded in Other Exchanges
Address
2555 Telegraph Road, Bloomfield Hills, MI, USA, 48302-0954
Penske Automotive Group operates in 22 U.S. states and overseas. It has 143 U.S. light-vehicle franchises including in Puerto Rico as well as 161 franchises overseas, primarily in the United Kingdom. The company is the second- largest U.S.-based dealership in terms of light-vehicle revenue and sells more than 35 brands, with 93% of retail automotive revenue coming from luxury and import names. Other services, in addition to new and used vehicles, are parts and repair and finance and insurance. The firm's Premier Truck Group owns 35 truck dealerships selling mostly Freightliner and Western Star brands, and Penske owns 19 CarShop used-vehicle stores in the U.S. and U.K. The company is based in Michigan and was called United Auto Group before changing its name in 2007.
Executives
Carlson John D. Jr. officer: EVP & CFO 2555 TELEGRAPH RD. BLOOMFIELD HILLS MI 48302
Barr John director 2555 TELEGRAPH ROAD BLOOMFIELD HILLS MI 48302-0954
Spradlin Shane M. officer: EVP, Gen. Counsel & Sec. 2555 TELEGRAPH RD. BLOOMFIELD HILLS MI 48302
Penske Roger S director, 10 percent owner, officer: Chair & CEO 2555 TELEGRAPH ROAD BLOOMFIELD HILLS MI 48302-0954
Denker Claude H Iii officer: EVP - Human Resources 2555 TELEGRAPH RD BLOOMFIELD HILLS MI 48302
Kurnick Robert H Jr director, officer: President 2555 TELEGRAPH ROAD BLOOMFIELD HILLS MI 48302-0954
Penske Gregory W director 3534 NORTH PECK ROAD EL MONTE CA 91731
Pierce Sandra E. director 2555 TELEGRAPH RD. BLOOMFIELD HILLS MI 48302
Duerheimer Wolfgang director 2555 TELEGRAPH RD BLOOMFIELD HILLS MI 48302
Penske Roger S Jr director 2555 TELEGRAPH ROAD BLOOMFIELD HILLS MI 48302
Mcwaters Kimberly J director 20410 NORTH 19TH AVENUE PHOENIX AZ 85027
Smith Greg C director FORD MOTOR COMPANY 21175 OAKWOOD BLVD DEARBORN MI 48124
Davis Lisa Ann director 2555 TELEGRAPH RD BLOOMFIELD HILLS MI 48302
Eisenson Michael R director C/O CHARLESBANK CAPITAL PARTNERS 600 ATLANTIC AV 28TH FL BOSTON MA 02210
Thompson H Brian director 1950 OLD GALLOWS ROAD SUITE 201 VIENNA VA 22182

Penske Automotive Group Headlines

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