What is Strategic Education 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.
Strategic Education 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
Strategic Education (Strategic Education) Business Description
Traded in Other Exchanges
Address
2303 Dulles Station Boulevard, Herndon, VA, USA, 20171
Strategic Education Inc. is an education services company that provides access to high-quality education through campus-based and online post-secondary education offerings, as well as through programs to develop job-ready skills for high-demand markets. The company operates through wholly-owned subsidiaries Strayer University and Capella University, both accredited post-secondary institutions of higher education located in the United States, as well as Torrens University, an accredited post-secondary institution of higher education located in Australia. It provide employees with access to affordable and industry relevant training, certificate, and degree programs.
Executives
| Viet D Dinh |
director |
GEORGETOWN UNIVERSITY LAW CENTER, 600 NEW JERSEY AVENUE NW, WASHINGTON DC 20001 |
| Robert R Grusky |
director |
C/O STRAYER EDUCATION INC, 2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| Raymond Karl Mcdonnell |
officer: President and COO |
C/O STRAYER EDUCATION INC, 2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| Daniel Wayne Jackson |
officer: Vice President - Operations |
C/O STRAYER EDUCATION INC., 2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| Michael Thawley |
director |
C/O STRATEGIC EDUCATION, INC., 2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| Robert S Silberman |
director, officer: Chairman & CEO |
C/O STRAYER EDUCATION INC, 2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| Michael A. Mcrobbie |
director |
C/O STRATEGIC EDUCATION, INC., 2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| William J Slocum |
director |
C/O INCLUSIVE CAPITAL PARTNERS, L.P., 1170 GORGAS AVENUE, SAN FRANCISCO CA 94129 |
| Tal Darmon |
officer: Chief Accounting Officer |
650 SOUTH EXETER STREET, BALTIMORE MD 21202 |
| Jerry Lavell Johnson |
director |
512 HERNDON PARKWAY, SUITE A, HERNDON VA 20170 |
| Casteen John T Iii |
director |
301 S. COLLEGE STREET, 30TH FLOOR, NC0630, CHARLOTTE NC 28288-0630 |
| J Kevin Gilligan |
director, officer: Executive Vice Chairman |
P O BOX 1441, MINNEAPOLIS MN 55440-1441 |
| Andrew E Watt |
officer: Chief Operating Officer |
225 SOUTH SIXTH STREET, 9TH FLOOR, MINNEAPOLIS MN 55402 |
| Lizette Benedi Herraiz |
officer: SVP and General Counsel |
2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
| Thomas J Aprahamian |
officer: Chief Accounting Officer |
2303 DULLES STATION BOULEVARD, HERNDON VA 20171 |
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