What is Western Assetorate Loan Fund Predictability Rank?
Not Rated
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.
Western Assetorate Loan Fund 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
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
Western Assetorate Loan Fund (Western Assetorate Loan Fund) Business Description
Traded in Other Exchanges
N/A
Address
620 Eighth Avenue, 49th Floor, New York, NY, USA, 10018
Western Asset Corporate Loan Fund Inc is the United States-based non-diversified, closed-end management investment company. Its investment objective is to maximize current income consistent with prudent efforts to preserve capital. The fund invests primarily in floating or variable-rate collateralized senior loans to corporations, partnerships or other business entities operating in various industries and geographic regions. Its portfolio of investments consists of different sectors such as capital goods, communications, transportation, healthcare, real estate, and others.
Executives
| Brian Eakes |
other: Manager/Investment Manager |
100 INTERNATIONAL DRIVE, BALTIMORE MD 21202 |
| Laura F Fergerson |
other: Manager/Investment Manager |
3310 QUALITY DRIVE, 2ND FLOOR, RANCHO CORDOVA CA 95670 |
| George P. Hoyt |
officer: Secretary and Ch Lgl Officer |
C/O FRANKLIN TEMPLETON, 100 FIRST STAMFORD PLACE, STAMFORD CT 06902 |
| Jed A. Plafker |
other: Director of Sub-Adviser |
ONE FRANKLIN PARKWAY, SAN MATEO CA 94403 |
| Matthew Nicholls |
other: Director of Sub-Adviser |
ONE FRANKLIN PARKWAY, SAN MATEO CA 94403 |
| Jennifer M Johnson |
other: Director of Sub-Adviser |
C/O FRANKLIN RESOURCES, INC., ONE FRANKLIN PARKWAY, SAN MATEO CA 94403-1906 |
| Fred Steven Jensen |
officer: Chief Compliance Officer |
LEGG MASON, 620 EIGHTH AVENUE, 49TH FLOOR, NEW YORK NY 10018 |
| Investors, Llp Bulldog |
10 percent owner |
PARK 80 WEST - PLAZA TWO, 250 PEHLE AVE. SUITE 708, SADDLE BROOK NJ 07663 |
| Andrew Dakos |
10 percent owner |
250 PEHLE AVE., SUITE 708, SADDLE BROOK NJ 07663 |
| Phillip Goldstein |
10 percent owner |
60 HERITAGE DRIVE, PLEASANTVILLE NY 10570 |
| Steven Samuels |
10 percent owner |
72 COLEYTOWN ROAD, WESTPORT CT 06882 |
| Christopher Berarducci |
officer: Treas/Principal Finan Officer |
LEGG MASON, 620 EIGHTH AVENUE, NEW YORK NY 10018 |
| Paolo M Cucchi |
director |
DEAN OF COLLEGE OF LIBERAL ARTS, DDREW UNIVESITY 108 BROTHERS COLLEGE, MADISON NJ 07940 |
| Nisha Kumar |
director |
1735 MARKET STREET, 32ND FLOOR, PHILADELPHIA PA 19103 |
| William R Hutchinson |
director |
535 N MICHIGAN STE 1012, CHICAGO IL 60611 |
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