What is Wolfspeed Predictability Rank?
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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.
Wolfspeed 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
Wolfspeed (Wolfspeed) Business Description
Traded in Other Exchanges
Address
4600 Silicon Drive, Durham, NC, USA, 27703
Wolfspeed Inc is involved in the manufacturing of wide bandgap semiconductors. It is focused on silicon carbide and gallium nitride materials and devices for power and radio-frequency (RF) applications. The company serves applications such as transportation, power supplies, inverters, and wireless systems. Geographically, it derives a majority of revenue from Europe and also has a presence in the United States; China; Japan; South Korea, and other countries.
Executives
| Neill Reynolds |
officer: Executive Vice President & CFO |
4600 SILICON DR, DURHAM NC 27703 |
| Le Duy Loan T |
director |
C/O NATIONAL INSTRUMENTS, 11500 MOPAC BLDG B, AUSTIN TX 78759 |
| Gregg A Lowe |
director, officer: PRESIDENT, CEO AND DIRECTOR |
400 W CESAR CHAVEZ STREET, AUSTIN TX 78701 |
| John B Replogle |
director |
C/O SEALY CORPORATION, ONE OFFICE PARKWAY, TRINITY NC 27370 |
| Stacy J Smith |
director |
2200 MISSION COLLEGE BLVD., RNB-4-151, SANTA CLARA CA 95054 |
| Glenda Dorchak |
director |
C/O MELLANOX TECHNOLOGIES, INC., 350 OAKMEAD PARKWAY, SUITE 100, SUNNYVALE CA 94085 |
| Clyde Hosein |
director |
C/O INTEGRATED DEVICE TECHNOLOGY, INC., 6024 SILVER CREEK VALLEY ROAD, SAN JOSE CA 95138 |
| Marvin Riley |
director |
5605 CARNEGIE BLVD., STE. 500, CHARLOTTE NC 28209 |
| Thomas H Werner |
director |
3939 NORTH FIRST STREET, SAN JOSE CA 95134 |
| Anne Clem Whitaker |
director |
109 BRIERY BRANCH COURT, MORRISVILLE NC 27560 |
| John C Hodge |
director |
C/O SILICON IMAGE, INC., 1060 E. ARQUES AVE., SUNNYVALE CA 94085 |
| David Todd Emerson |
officer: EVP, GM LED |
4600 SILICON DRIVE, DURHAM NC 27703 |
| Michael E Mcdevitt |
officer: INTER. CHIEF FINANCIAL OFFICER |
713 WALCOTT WAY, CARY NC 27519 |
| Daniel J Castillo |
officer: EVP Cree & President-Lighting |
2645 SILVER CRESCENT DRIVE, CHARLOTTE NC 28273 |
| Darren R Jackson |
director |
C/O BEST BUY INC, 7075 FLYING CLOUD DR, EDEN PRAIRIE MN 55344 |
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