Pacific Gas & Electric Co (Pacific Gas & Electric Co) Predictability Rank

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What is Pacific Gas & Electric Co 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.

Pacific Gas & Electric Co 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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Pacific Gas & Electric Co (Pacific Gas & Electric Co) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Utilities » Utilities - Regulated » Pacific Gas & Electric Co (AMEX:PCG.PRA.PFD) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

PCG.PRI.PFD:USA PCG.PRH.PFD:USA PCG.PRG.PFD:USA PCGpE.PFD:USA PCGpD.PFD:USA PCG.PRC.PFD:USA PCG.PRB.PFD:USA

Address

77 Beale Street, P.O. Box 770000, San Francisco, CA, USA, 94177

Website

http://www.pge.com

Pacific Gas & Electric Co is a vertically integrated electricity and natural gas utility. It operates in northern and central California and are engaged in the businesses of electricity and natural gas distribution.

Executives

Edward G Cannizzaro	director	5130 HACIENDA DRIVE, DUBLIN CA 94568
Stephanie N Williams	officer: VP, CFO, and Controller	77 BEALE STREET, PO BOX 77000, SAN FRANCISCO CA 94177
Carlos M Hernandez	director
Newtyn Management, Llc	10 percent owner	60 EAST 42ND STREET, 9TH FLOOR, NEW YORK NY 10165
Sumeet Singh	officer: EVP/CRO & Chf Safety Ofc	77 BEALE STREET, PO BOX 770000, SAN FRANCISCO CA 94177
Julius Cox	officer: EVP/Ppl, Shrd Svcs & Spply Chn	77 BEALE STREET, POB 770000, SAN FRANCISCO CA 94177
Jason M Glickman	officer: EVP, Engrg, Plng and Strat	77 BEALE STREET, PO BOX 770000, SAN FRANCISCO CA 94177
Marlene Santos	officer: EVP and Chief Customer Officer	77 BEALE STREET, P.O. BOX 770000, SAN FRANCISCO CA 94117
Adam L Wright	director, officer: EVP, Operations and COO	77 BEALE STREET, P.O. BOX 770000, SAN FRANCISCO CA 94177
Patricia K Poppe	director	77 BEALE STREET, POB 770000, SAN FRANCISCO CA 94177
Jessica Denecour	director	C/O MOBILEIRON, INC., 415 EAST MIDDLEFIELD ROAD, MOUNTAIN VIEW CA 94043
Robert C Flexon	director	1313 N MARKET ST, WILMINGTON DE 19894
Michael R Niggli	director	101 ASH STREET HQ18, SAN DIEGO CA 92101
Dean Seavers	director	70 SUFFOLK ROAD, CHESTNUT HILL MA 02467
Oluwadara Johnson Treseder	director	C/O ROBINHOOD MARKETS, INC., 85 WILLOW ROAD, MENLO PARK CA 94025

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