Starwood Property Trust (Starwood Property Trust) Predictability Rank

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What is Starwood Property Trust 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.

Starwood Property Trust 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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Starwood Property Trust (Starwood Property Trust) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Starwood Property Trust Inc (NYSE:STWD) » Definitions » Predictability Rank

Comparable Companies

AGNC RITM NLY BXMT ABR RC CMTG ARI LADR PMT CIM FBRT TWO MFA EFC RWT KREF NYMT ARR DX

Traded in Other Exchanges

STWD:Mexico VSP:Germany

Address

591 West Putnam Avenue, Greenwich, CT, USA, 06830

Website

https://www.starwoodpropertytrust.com

Starwood Property Trust Inc is an American real estate investment trust principally engaged in originating, acquiring, and managing commercial mortgage loans and commercial mortgage-backed securities in the U.S. and Europe. The company organizes its activities into Commercial and Residential Lending Segment, Infrastructure Lending Segment, Property Segment and Investing and Servicing Segment. The former acquires and finances first mortgages or mortgages with primary lien positions. The collateral for these mortgages is mainly office and hospitality properties in the American West and Northeast. Starwood's Investing and Servicing unit primarily generates revenue from the acquisition and sale of commercial mortgage-backed securities.

Executives

Jeffrey F. Dimodica	director	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Deborah L Harmon	director	5404 WISCONSIN AVENUE, SUITE 410, CHEVY CHASE MD 20815
Heather N. Bennett	officer: General Counsel and CCO	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Andrew Jay Sossen	officer: General Counsel	555 CALIFORNIA STREET 50TH FLOOR, SAN FRANCISCO CA 94104
Barry S Sternlicht	director, officer: CEO, Chairman of Board of Dir.	STARWOOD CAPITAL GROUP GLOBAL LP, 1601 WASHINGTON AVENUE, SUITE 800, MIAMI BEACH FL 33139
Frederick Perpall	director	12700 PARK CENTRAL DRIVE, SUITE 1700, DALLAS TX 75251
Jeffrey G. Dishner	director	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Rina Paniry	officer: Chief Financial Officer	STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Fred S. Ridley	director	591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Camille J. Douglas	director	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Solomon J. Kumin	director	STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Strauss Zelnick	director	C/O ZELNICKMEDIA, 650 FIFTH AVE 31ST FLOOR, NEW YORK NY 10019
Boyd Fellows	director, officer: President	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Richard D. Bronson	director	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830
Perry Stewart Ward	officer: Chief Financial Officer	C/O STARWOOD PROPERTY TRUST, INC., 591 WEST PUTNAM AVENUE, GREENWICH CT 06830