American Water Works Co (American Water Works Co) Predictability Rank

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What is American Water Works Co 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.

American Water Works Co 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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American Water Works Co (American Water Works Co) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Utilities » Utilities - Regulated » American Water Works Co Inc (NYSE:AWK) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

1AWK:Italy AWC:Germany AWC:Germany AWC:Germany A1WK34:Brazil

Address

1 Water Street, Camden, NJ, USA, 08102-1658

Website

https://www.amwater.com

American Water Works is the largest investor-owned U.S. water and wastewater utility, serving approximately 3.5 million customers in 16 states. It provides water and wastewater services to residential, commercial, and industrial customers and operates predominantly in regulated markets. The company's nonregulated business is water services for military bases, which operates under long-term contracts with regulated-like returns.

Executives

Michael Marberry	director	3050 SPRUCE STREET, ST. LOUIS MO 63103
Martha Clark Goss	director	C/O OCWEN FINANCIAL CORPORATION, 1661 WORTHINGTON RD, SUITE 100, WEST PALM BEACH FL 33409
Laurie P. Havanec	director	ONE CARRIER PLACE, FARMINGTON CT 06032
Melanie M Kennedy	officer: SVP, Human Resources	1 WATER STREET, CAMDEN NJ 08102-1658
John C. Griffith	officer: EVP Chief Financial Officer	1 WATER STREET, CAMDEN NJ 08102-1658
James H Gallegos	officer: EVP and General Counsel	1 WATER STREET, CAMDEN NJ 08102-1658
Cheryl Norton	officer: SVP,Chief Envrn Off & East Div	1 WATER STREET, CAMDEN NJ 08102-1658
Melissa K. Wikle	officer: Vice President and Controller	1 WATER STREET, CAMDEN NJ 08102-1658
Walter Lynch	officer: Executive VP, Eastern Division	1 WATER STREET, CAMDEN NJ 08102-1658
Maureen Duffy	officer: VP,Corp.Comm.&External Affairs	1 WATER STREET, CAMDEN NJ 08102-1658
Adam W. Noble	officer: Chief Tech. & Innov. Officer	1 WATER STREET, CAMDEN NJ 08102-1658
Lloyd M Yates	director	1N 2ND ST, HARTSVILLE SC 29550
Bruce A Hauk	officer: Pres, Reg. Ops & Military Serv	110 W. TAYLOR STREET, SAN JOSE CA 95110
Kevin B Kirwan	officer: SVP, Chief Op Excel&Safety Off	1 WATER STREET, CAMDEN NJ 08102-1658
Michael A Sgro	officer: Interim General Counsel	1 WATER STREET, CAMDEN NJ 08102-1658