What is General American Investors Company Predictability Rank?
Not Rated
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.
General American Investors Company 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
General American Investors Company (General American Investors Company) Business Description
Traded in Other Exchanges
N/A
Address
530 Fifth Avenue, 26th Floor, New York, NY, USA, 10036
General American Investors Company Inc is a closed-end, diversified management investment company. The primary investment objective of the company is long-term capital appreciation through investment in companies with above-average growth potential. It focuses on equity securities with growth potential at reasonable valuations.
Executives
| Anang K. Majmudar |
officer: Vice-President |
GENERAL AMERICAN INVESTORS COMPANY, INC., 530 FIFTH AVE - 26TH FLOOR, NEW YORK NY 10036 |
| Jeffrey W Priest |
officer: President |
GENERAL AMERICAN INVESTORS COMPANY, INC., 530 FIFTH AVE - 26TH FLOOR, NEW YORK NY 10036 |
| Eugene S Stark |
officer: Vice-President |
GENERAL AMERICAN INVESTORS COMPANY, INC., 530 FIFTH AVE - 26TH FLOOR, NEW YORK NY 10036 |
| Savannah Sachs |
director |
530 FIFTH AVE, 26TH FL, NEW YORK NY 10036 |
| Rodney B Berens |
director |
C/O KEYSTONE PROPERTY TRUST, 200 FOUR FALLS CORP. CENTER SUITE 208, WEST CONSHOHOCKEN PA 19428 |
| Liron Kronzon |
officer: Vice-President |
GENERAL AMERICAN INVESTORS COMPANY, INC., 530 FIFTH AVE - 26 FL, NEW YORK NY 10036 |
| Samantha X. Jin |
officer: Treasurer |
530 FIFTH AVE 26TH FLOOR, NEW YORK NY 10036 |
| Santa Maria Connie A. |
officer: Assistant Corporate Secretary |
GENERAL AMERICAN INVESTORS COMPANY, INC., 530 FIFTH AVE 26TH FLOOR, NEW YORK NY 10036 |
| Spencer Davidson |
director, officer: President & CEO |
GENERAL AMERICAN INVESTORS CO INC, 530 FIFTH AVE - 26TH FLOOR, NEW YORK NY 10036 |
| Trust F B O Altschul Emily H U A D 1 9 67 |
officer: Trustee/President & CEO - GAM |
|
| Trust Fbo Altschul Serena Uad 12 15 72 |
officer: Trustee/President & CEO - GAM |
C/O OVERBROOK MANAGEMENT CORP, 122 EAST 42ND STREET SUITE 2500, NEW YORK NY 10168-2500 |
| Trust F B O Altschul Stephen F U A D 10 22 58 |
officer: Trustee/Pres. & CEO - GAM |
|
| Rose Peabody Lynch |
director |
C/O STEVEN MADDEN, LTD., 52-16 BARNETT AVENUE, LONG ISLAND CITY NY 11104 |
| Altschul Arthur G Jr |
director |
C/O OVERBROOK MANAGEMENT CORP, 122 E. 42ND STREET, SUITE 2500, NEW YORK NY 10168 |
| Trust Fbo Serena Vr Altschul Uad 5/22/71 |
other: Trustee is a GAM Director |
C/O OVERBROOK MANAGEMENT CORP, 122 EAST 42ND STREET SUITE 2500, NEW YORK NY 10168-2500 |
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