What is SolarWinds 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.
SolarWinds 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
SolarWinds (SolarWinds) Business Description
Traded in Other Exchanges
Address
7171 Southwest Parkway, Building 400, Austin, TX, USA, 78735
SolarWinds Corp is a provider of information technology (IT), and management software. Company offers full-stack observability solutions. The company's business is focused on building products that enable technology professionals and leaders to securely monitor and manage the performance of their IT environments, whether on-premises, in the cloud or in hybrid deployments. The products offered are designed to monitor and manage networks, systems, databases and applications across on-premises, multi-cloud and hybrid IT environments without the need for customization or professional services. Majority of company's revenue is earned in United States.
Executives
| Easwaran Sundaram |
director |
C/O JETBLUE AIRWAYS CORPORATION, 27-01 QUEENS PLAZA NORTH, LONG ISLAND CITY NY 11101 |
| Jason Bliss |
officer: EVP General Counsel |
7171 SOUTHWEST PKWY STE 400, AUSTIN TX 78735-6140 |
| Rohini Kasturi |
officer: EVP, Chief Product Officer |
7171 SOUTHWEST PARKWAY, BUILDING 400, AUSTIN TX 78735 |
| Andrea Webb |
officer: EVP, Chief Customer Officer |
7171 SOUTHWEST PARKWAY, BUILDING 400, AUSTIN TX 78735 |
| Sudhakar Ramakrishna |
director, officer: CEO & President |
4750 WILLOW RD., PLEASANTON CA 94588 |
| Cathleen A Benko |
director |
ONE BOWERMAN DRIVE, BEAVERTON OR 97005 |
| Douglas P Smith |
director |
C/O SILVER LAKE, 2776 SAND HILL ROAD, SUITE 100, MENLO PARK CA 94025 |
| David Gardiner |
officer: Executive VP, Core IT |
7171 SOUTHWEST PKWY STE 400, AUSTIN TX 78735-6140 |
| James Barton Kalsu |
officer: EVP CFO & Treasurer |
7171 SOUTHWEST PARKWAY, BUILDING 400, AUSTIN TX 78735 |
| Hermes Usa Investors Venture Ii, Lp |
other: See Remarks |
C/O CORPORATION SERVICES COMPANY, 251 LITTLE FALLS DRIVE, WILMINGTON DE 19808-1674 |
| Neuberger Berman Insurance Fund Series Interests Of The Sali Multi-series Fund, L.p. |
10 percent owner |
325 N. SAINT PAUL STREET, SUITE 4900, DALLAS TX 75201 |
| Harbourvest Global Annual Private Equity Fund L.p. |
other: See Remarks |
HARBOURVEST PARTNERS, LLC, ONE FINANCIAL CENTER, 44TH FLOOR, BOSTON MA 02111 |
| Alpinvest Partners B.v. |
10 percent owner |
JACHTHAVENWEG 118, AMSTERDAM P7 1081 KJ |
| Nb Alternatives Advisers Llc |
10 percent owner |
325 N. SAINT PAUL STREET, SUITE 4900, DALLAS TX 75201 |
| Howard Hughes Medical Institute |
other: HHMI is a member of 10% group |
4000 JONES BRIDGE ROAD, CHEVY CHASE MD 20815-6789 |
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