MSAfety (MSAfety) Predictability Rank

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What is MSAfety 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.

MSAfety 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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MSAfety (MSAfety) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Business Services » MSA Safety Inc (NYSE:MSA) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

M07:Germany

Address

1000 Cranberry Woods Drive, Cranberry Township, PA, USA, 16066-5207

Website

https://www.msasafety.com

MSA Safety Inc makes safety products that are used to protect workers in the oil and gas and mining industries. The products include breathing apparatuses, fall protection, portable gas detection systems, industrial head protection, fire and rescue helmets, and fixed gas and flame detection systems. End markets include the fire service, contractor, industrial, mining, oil and gas, and utilities industries. MSA Safety generates most of its revenue in North America. The company's reportable geographic segments are Americas, International and Corporate.

Executives

Rebecca B Roberts	director	1000 LOUISIANA, SUITE 5800, HOUSTON TX 77002
Jonathan D. Buck	officer: Chief Accounting Officer	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Bob Willem Leenen	officer: Vice President	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Richard W Roda	officer: Vice President, Secretary, CLO	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Stephanie L Sciullo	officer: Vice President, CLO	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Nishan J. Vartanian	officer: Vice President	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Lee B Mcchesney	officer: Senior VP, CFO and Treasurer	1000 STANLEY DRIVE, NEW BRITAIN CT 06053
Robert A Bruggeworth	director	C/O RF MICRO DEVICES, INC., 7628 THORNDIKE ROAD, GREENSBORO NC 27409
William M Lambert	officer: Vice President	C/O MSA SAFETY, 1000 CRANBERRY WOODS DRIVE, CRANBERRY TWP PA 16066
Ryan John T Iii	director, 10 percent owner, officer: Chairman and CEO	P O BOX 426, PITTSBURGH PA 15230
Kenneth D. Krause	officer: VP, CFO and Treasurer	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Luca Savi	director	C/O ITT CORPORATION, 1133 WESTCHESTER AVENUE, WHITE PLAINS NY 10604
Sandra Phillips Rogers	director	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Blanco Steven C. Sr.	officer: Vice President	1000 CRANBERRY WOODS DRIVE, CRANBERRY TOWNSHIP PA 16066
Diane M Pearse	director	P O BOX 426, PITTSBURGH PA 152300426