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.
GuruFocus conducted a back test study of Warren Buffett's strategy of "buying good companies at fair prices" for the years from 1998-2008.
Hubbell 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.
Thank you for viewing the detailed overview of Hubbell's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.
Hubbell is a diversified conglomerate industrial company that mostly competes in the electrical components market. Its products and services serve vital portions of the U.S. electrical supply chain, including transmission and distribution as well as the commercial, industrial, and residential end markets. The company organizes its business into two segments: electrical and power systems. The consolidated business sells about two thirds of its products via distributors, with the remainder sold via direct sales to utilities and contractors. The 2018 acquisition of Aclara, folded into the utility solutions segment, brought Hubbell a portfolio of smart meters and communication sensors that serves electrical, water, and gas utilities.
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