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Visa 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.


Visa 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

Visa Predictability Rank Related Terms

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


Visa Business Description

Visa logo
Industry
Financial Services » Credit Services NAICS : 522320 SIC : 7389
Address
P.O. Box 8999, San Francisco, CA, USA, 94128-8999
Visa is the largest payment processor in the world. In fiscal 2021, it processed over $10 trillion in purchase transactions. Visa operates in over 200 countries and processes transactions in over 160 currencies. Its systems are capable of processing over 65,000 transactions per second.
Executives
Fabara Paul D officer: EVP and Chief Risk Officer 200 VESEY STREET NEW YORK NY 10285
Kelly Alfred F Jr director, officer: CHAIRMAN & CEO AMERICAN EXPRESS COMPANY 200 VESEY STREET NEW YORK NY 10285
Taneja Rajat officer: PRESIDENT, TECHNOLOGY C/O ELECTRONIC ARTS INC. 209 REDWOOD SHORES PARKWAY, LEGAL DEPT. REDWOOD CITY CA 94065
Mahon Tullier Kelly officer: EVP, GENERAL COUNSEL C/O VISA INC. PO BOX 8999 SAN FRANCISCO CA 94128
Biggar Lynne officer: EVP, CHIEF MRKTNG & COMM OFF 1271 AVENUE OF THE AMERICAS NEW YORK NY 10020-1300
Swainson John A director C/O VISA INC. 900 METRO CENTER BLVD. FOSTER CITY CA 94404
Carney Lloyd director C/O MICROMUSE INC 139 TOWNSEND ST SAN FRANCISCO CA 94107
Prabhu Vasant M officer: VICE CHAIR & CFO C/O SAFEWAY INC 5918 STONERIDGE MALL ROAD PLEASANTON CA 94588
Mcinerney Ryan officer: PRESIDENT C/O VISA INC. PO BOX 8999 SAN FRANCISCO CA 94128
Hoffmeister James H officer: SVP, GBL CORP CONTRL & CAO C/O VISA INC. PO BOX 8999 SAN FRANCISCO CA 94128
Fernandez-carbajal Francisco Javier director P.O. BOX 8999 C/O VISA INC. SAN FRANCISCO CA 94128-8999
Matschullat Robert W director C/O THE CLOROX COMPANY 1221 BROADWAY OAKLAND CA 94612
Morrison Denise M director METLIFE 200 PARK AVENUE NEW YORK NY 10166
Nora Johnson Suzanne M director 85 BROAD STREET NEW YORK NY 10004
Cranston Mary B director C/O VISA INC. P.O. BOX 8999 SAN FRANCISCO CA 94128-8999

Visa Headlines

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