Willis Towers Watson (Willis Towers Watson) Predictability Rank

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What is Willis Towers Watson 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.

Willis Towers Watson 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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Willis Towers Watson (Willis Towers Watson) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Insurance » Willis Towers Watson PLC (NAS:WTW) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

WTW:Mexico W1LT34:Brazil

Address

C/o Willis Group Ltd, 51 Lime Street, London, GBR, EC3M 7DQ

Website

https://www.willistowerswatson.com

In January 2016, Towers Watson and Willis Group merged to form Willis Towers Watson, a global advisory, insurance brokerage, and solutions company. The company operates in two business segments: health, wealth, and career (its consulting operations) and risk and brokering (its brokerage operations). It has about 47,000 employees.

Executives

Pamela Thomson-hall	officer: Head of International	51 LIME STREET, LONDON X0 EC3M 7DQ
Anne Pullum	officer: Head of Strategy and CAO	C/O WILLIS TOWERS WATSON, 200 LIBERTY ST, 7TH FLOOR, NEW YORK NY 10281
Julie Jarecke Gebauer	officer: Head of Human Capital&Benefits	JUPITER SATURN HOLDING CO, 875 THIRD AVENUE, NEW YORK NY 10022
Fredric J Tomczyk	director	TORONTO DOMINION CENTRE, PO BOX 1, TORONTO A6 M5K IA2
Stephen M. Chipman	director	3101 DREXEL DRIVE, DALLAS TX 75205
Jacqueline Hunt	director	53 SOUTH GREEN, MATTISHALL, NORFOLK X0 N220 3JY
Anne Donovan Bodnar	officer: Head of Human Resources	901 N. GLEBE ROAD, ARLINGTON VA 22203
Gene H Wickes	officer: Head of Exchange Solutions	901 N GLEBE ROAD, ARLINGTON VA 22203
Brendan R Oneill	director	C/O IMPERIAL CHEMICAL INDUSTRIES PLC, 20 MANCHESTER SQUARE, LONDON X0 W1U 3AN
Paul C Reilly	director	880 CARILLON PARKWAY, ST. PETERSBURG FL 33716
Alexis Faber	officer: Chief Operating Officer	3340 PLAYERS CLUB PARKWAY, SUITE 200, MEMPHIS TN 38125
Andrew Jay Krasner	officer: Chief Financial Officer	1450 BRICKELL AVENUE, SUITE 1600, MIAMI FL 33131
Fumbi F. Chima	director	44 THORNBURY CT., 36-38 CHEPSTOW VILLAS, LONDON X0 WII 2RE
Michelle R Swanback	director	7001 EAST BELLEVIEW AVENUE, DENVER CO 80237
Inga K Beale	director	C/O CRAWFORD & COMPANY, 5335 TRIANGLE PARKWAY, PEACHTREE CORNERS GA 30092