What is Viper Energy 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.
Viper Energy 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
Viper Energy (Viper Energy) Business Description
Traded in Other Exchanges
Address
500 West Texas, Suite 1200, Midland, TX, USA, 79701
Viper Energy Inc was formed by Diamondback Energy in 2014 to own mineral royalty interests in oil and natural gas properties in the Permian Basin. At the end of 2020, Viper owns 24,350 net royalty acres that produced 26,551 boe/d. Proved reserves are mostly oil, and at the end of 2020 stand at 99,392 mboe.
Executives
| Bx Swt Ml Holdco Llc |
10 percent owner |
345 PARK AVENUE, NEW YORK NY 10154 |
| Blackstone Holdings Iii L.p. |
10 percent owner |
C/O BLACKSTONE INC., 345 PARK AVENUE, NEW YORK NY 10154 |
| Laurie H Argo |
director |
1100 LOUISIANA STREET, SUITE 1000, HOUSTON TX 77002 |
| Frank C. Hu |
director |
625 LIBERTY AVE., SUITE 1700, PITTSBURGH PA 15222 |
| Armour Spencer D Iii |
director |
400 W. ILLINOIS, SUITE 800, MIDLAND TX 79701 |
| Bx Guidon Topco Llc |
10 percent owner |
C/O BLACKSTONE MANAGEMENT PARTNERS L.L.C, 345 PARK AVENUE, 43RD FLOOR, NEW YORK NY 10154 |
| Matt Zmigrosky |
officer: Exec. VP and General Counsel |
500 WEST TEXAS AVENUE, SUITE 1200, MIDLAND TX 79701 |
| Bx Swallowtail Royalties Holding Llc |
10 percent owner |
C/O THE BLACKSTONE GROUP INC., NEW YORK NY 10154 |
| Swallowtail Royalties Ii Llc |
10 percent owner |
7750 N. MACARTHUR BLVD., STE. 120-370, IRVING TX 75063 |
| Swallowtail Royalties Llc |
10 percent owner |
545 E. JOHN CARPENTER FWY., STE. 1300, IRVING TX 75062 |
| Swallowtail Royalties Holdings Llc |
10 percent owner |
545 E. JOHN CARPENTER FWY., STE. 1300, IRVING TX 75062 |
| Guidon Energy Holdings Lp |
10 percent owner |
C/O BLACKSTONE MANAGEMENT PARTNERS L.L.C, 345 PARK AVENUE, 43RD FLOOR, NEW YORK NY 10154 |
| Guidon Energy Holdings Gp Llc |
10 percent owner |
C/O BLACKSTONE MANAGEMENT PARTNERS L.L.C, 345 PARK AVENUE, 43RD FLOOR, NEW YORK NY 10154 |
| Blackstone Energy Management Associates Ii L.l.c. |
10 percent owner |
C/O THE BLACKSTONE GROUP L.P., 345 PARK AVE., NEW YORK NY 10154 |
| Blackstone Ema Ii L.l.c. |
10 percent owner |
C/O THE BLACKSTONE GROUP L.P., 345 PARK AVE., NEW YORK NY 10154 |
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