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Leaf Group (Leaf Group) Predictability Rank


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What is Leaf Group Predictability Rank?

1 (5)

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.

Leaf Group 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

PredictablesNon-PredictableAll stocks
Total Number of stocks57018332403
Total Lost Money61830891
Total Lost More Than 50%18412430
Total Lost More Than 90%48690
Average Gain260.6%100.0%138.1%
Median Gain150.0%13.0%39.0%
Maximum Gain2852.0%11483.0%11483.0%
Maximum Loss-100.0%-100.0%-100.0%
Annualized Average Gain12.7%6.7%8.4%
Annualized Median Gain8.9%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 Rank5-Star4.5-Star4-Star3.5-Star3-Star2.5-Star2-Star1-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

Leaf Group Predictability Rank Related Terms

Thank you for viewing the detailed overview of Leaf Group's Predictability Rank provided by GuruFocus.com. Please click on the following links to see related term pages.

Leaf Group (Leaf Group) Business Description

Industry
GURUFOCUS.COM » STOCK LIST » Communication Services » Interactive Media » Leaf Group Ltd (NYSE:LEAF) » Definitions » Predictability Rank
Comparable Companies
LOV JMDA IZEA AUTO SFUN MOXC FENG GRMM LKCO TC GOOGL FB HKSE:00700 XAMS:PRX JSE:NPN NTES BIDU SPOT TWLO XKRX:035420
Traded in Other Exchanges
N/A
Address
1655 26th Street, Santa Monica, CA, USA, 90404
Website
https://www.leafgroup.com
Leaf Group Ltd is a diversified consumer internet company that builds enduring, creator-driven brands that reach passionate audiences in large and growing lifestyle categories, including fitness and wellness and home, art and design. The company operates in three segments: Society6 Group, Saatchi Art Group, and Media Group. Society6 Group is made-to-order marketplace business and includes Society6.com and its wholesale channel. Saatchi Art Group which includes SaatchiArt.com and its complementary art fair event brand, The Other Art Fair which is online art gallery with a focus on emerging artists. Its Media Group segment consists of a diverse portfolio of media properties that educate and inform consumers on a broad range of topics.
Executives
Adam F. Wergeles officer: EVP, Gen Counsel & Secretary C/O REACHLOCAL, INC. 21700 OXNARD STREET, SUITE 1600 WOODLAND HILLS CA 91367
Sean P Moriarty director, officer: Chief Executive Officer C/O LEAF GROUP LTD., 1655 26TH STREET, SANTA MONICA CA 90404
Brian Gephart officer: Chief Financial Officer 1655 26TH STREET, SANTA MONICA CA 90404
Spectrum Equity Investors V L P 10 percent owner ONE INTERNATIONAL PLACE 29TH FL BOSTON MA 02110
Osmium Capital Ii, Lp other: May be member of 10% group 300 DRAKES LANDING ROAD, SUITE 172, GREENBRAE CA 94904
John Hartnett Lewis other: May be member of 10% group 388 MARKET STREET, SUITE 920, SAN FRANCISCO CA 94111
Osmium Spartan L P other: May be member of 10% group 300 DRAKES LANDING ROAD, SUITE 172, GREENBRAE CA 94904
Osmium Partners, Llc other: May be member of 10% group 300 DRAKES LANDING ROAD, SUITE 172, GREENBRAE CA 94904
Osmium Capital Lp other: May be member of 10% group 300 DRAKES LANDING ROAD, SUITE 172, GREENBRAE CA 94904
Sea V Management Llc 10 percent owner 333 MIDDLEFIELD ROAD SUITE 200 MENLO PARK CA 94025
Spectrum Equity Associates V Lp 10 percent owner 333 MIDDLEFIELD ROAD SUITE 200 MENLO PARK CA 94025
Spectrum V Investment Managers Fund Lp 10 percent owner 333 MIDDLEFIELD ROAD SUITE 200 MENLO PARK CA 94025
Osmium Diamond, Lp other: May be member of 10% group C/O OSMIUM PARTNERS, LLC, 300 DRAKES LANDING ROAD, SUITE 172, GREENBRAE CA 94904
Brian Pike officer: CTO & COO C/O LEAF GROUP LTD. 1655 26TH STREET SANTA MONICA CA 90404
Boyle Capital Management, L.l.c. other: May be member of 10% group 1230 OFFICE PLAZA DRIVE WEST DES MOINES IA 50266-2300