Motorola Solutions (Motorola Solutions) Predictability Rank

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What is Motorola Solutions 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.

Motorola Solutions 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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Motorola Solutions (Motorola Solutions) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Hardware » Motorola Solutions Inc (NYSE:MSI) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

1MSI:Italy MTLA:Germany MTLA:Germany MTLA:Germany M1SI34:Brazil MOSI:Austria MSI:Argentina

Address

500 West Monroe Street, Suite 4400, Chicago, IL, USA, 60661

Website

https://www.motorolasolutions.com

Motorola Solutions is a leading provider of communications and analytics, primarily serving public safety departments as well as schools, hospitals, and businesses. The bulk of the firm's revenue comes from sales of land mobile radios and radio network infrastructure, but the firm also sells surveillance equipment and dispatch software. Most of Motorola's revenue comes from government agencies, while roughly 25% comes from schools and private businesses. Motorola has customers in over 100 countries and in every state in the United States.

Executives

John P Molloy	officer: EVP and COO	500 WEST MONROE ST., CHICAGO IL 60661
Cynthia Yazdi	officer: SVP, Communications & Brand	500 WEST MONROE STREET, CHICAGO IL 60661
Jason J Winkler	officer: EVP and CFO	500 WEST MONROE STREET, CHICAGO IL 60661
Rajan Naik	officer: SVP, Strategy & Ventures	500 WEST MONROE STREET, CHICAGO IL 60661
James A Niewiara	officer: SVP, GENERAL COUNSEL	MOTOROLA SOLUTIONS, INC., 500 WEST MONROE ST., CHICAGO IL 60661
Katherine A Maher	officer: CVP and CAO	500 WEST MONROE ST., CHICAGO IL 60661
Gregory Q Brown	director, officer: Chairman and CEO	500 WEST MONROE ST., CHICAGO IL 60661
Kenneth D Denman	director
Karen E Dunning	officer: SVP, Human Resources	MOTOROLA SOLUTIONS, INC., 500 WEST MONROE ST., CHICAGO IL 60661
Mark S. Hacker	officer: EVP, GC & Chief Admin Officer	500 WEST MONROE ST., CHICAGO IL 60661
Joseph M Tucci	director	EMC CORPORATION, 176 SOUTH STREET, HOPKINTON MA 01748
Clayton M Jones	director	400 COLLINS ROAD NE, CEDAR RAPIDS IA 52498
Judy C Lewent	director	PO BOX 100, WHITEHOUSE STATION NJ 08889
Ayanna Howard	director	111 MCINNIS PARKWAY, SAN RAFAEL CA 94903
Mahesh Saptharishi	officer: EVP and CTO	500 WEST MONROE ST., CHICAGO IL 60661