Onto Innovation (Onto Innovation) Predictability Rank

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What is Onto Innovation 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.

Onto Innovation 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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Onto Innovation (Onto Innovation) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Semiconductors » Onto Innovation Inc (NYSE:ONTO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

NNM:Germany

Address

16 Jonspin Road, Wilmington, MA, USA, 01887

Website

https://www.ontoinnovation.com

Onto Innovation Inc is engaged in the design, development, manufacture, and support of high-performance control metrology, defect inspection, lithography, and data analysis systems used by microelectronics device manufacturers. The Company and its subsidiaries currently operate in a single operating segment. The company mainly operates in the United States, Asia, and Europe, with China and South Korea the largest sources of total revenue.

Executives

Mark Slicer	officer: Chief Financial Officer	16 JONSPIN ROAD, WILMINGTON MA 01887
Robert Fiordalice	other: See Remarks	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
Srinivas Vedula	officer: SVP, Customer Success	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
Michael P Plisinski	director, officer: Chief Executive Officer	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
D Mayson Brooks	officer: VP, GM IBU	C/O ONTO INNOVATION INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
Ju Jin	other: SEE REMARKS	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
David Brian Miller	director	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
Karen M Rogge	director	APPLIED MICRO CIRCUITS CORP, 4555 GREAT AMERICA PARKWAY, SUITE 601, SANTA CLARA CA 95054
May Su	director	16 JONSPIN ROAD, WILMINGTON MA 01887
Ramil Yaldaei	officer: Chief Operating Officer	C/O ONTO INNOVATION INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
Yoon Ah Oh	officer: General Counsel	16 JONSPIN ROAD, WILMINGTON MA 01887
James Harlow	officer: Chief Operating Officer	16 JONSPIN RD, WILMINGTON MA 01887
Stephen Douglas Kelley	director	1900 S. PRICE ROAD, CHANDLER AZ 85286
Steven R Roth	officer: SEE REMARKS	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887
Bruce C Rhine	director	C/O ONTO INNOVATION, INC., 16 JONSPIN ROAD, WILMINGTON MA 01887