PNM Resources (PNM Resources) Predictability Rank

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What is PNM Resources 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.

PNM Resources 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

PNM Resources Predictability Rank Related Terms

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PNM Resources (PNM Resources) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Utilities » Utilities - Regulated » PNM Resources Inc (NYSE:PNM) » Definitions » Predictability Rank

Comparable Companies

MGEE POR IDA HE GNE VIA SUME OGE PNW EVRG NEE SO DUK LSE:NG. AEP PCG D BOM:532555 EXC PEG

Traded in Other Exchanges

98P:Germany

Address

414 Silver Avenue SW, Albuquerque, NM, USA, 87102-3289

Website

https://www.pnmresources.com

PNM Resources Inc, or PNMR, is a holding company that owns regulated utilities companies providing electricity and electric services. PNMR segments its operations by its two subsidiaries, PNM and TNMP. PNM provides electric generation, transmission, and distribution services mainly to areas of New Mexico. While PNM uses a variety of fuel sources across its power plant portfolio, its coal and gas-fueled sites produce most of the energy. TNMP owns and operates transmission and distribution services primarily in small to medium-sized communities in Texas. Both subsidiaries generate revenue for PNMR through the sale of electricity and transmission service fees fairly evenly split between residential and commercial customers. PNM generates the vast majority of PNMR's total revenue.

Executives

Elisabeth A Eden	officer: SVP, CFO & Treasurer	414 SILVER AVE SW, MS1295, ALBUQUERQUE NM 87102
Henry E Monroy	officer: VP & Corporate Controller	414 SILVER AVENUE SW, MS1015, ALBUQUERQUE NM 87102-3289
Charles N Eldred	officer: Chief Financial Officer	414 SILVER AVE SW MS 1275, ALBUQUERQUE NM 87102-3289
Joseph Don Tarry	officer: VP and Corporate Controller	414 SILVER AVE SW MS 1205, ALBUQUERQUE NM 87102-3289
Patrick V Apodaca	officer: SR VP, GEN COUNSEL & SECY	414 SILVER AVE SW MS 1275, ALBUQUERQUE NM 87102-3289
Ronald N. Darnell	officer: VICE PRESIDENT, REGULATORY AFF	414 SILVER AVE SW MS 1275, ALBUQUERQUE NM 87102-3289
Vicky A Bailey	director	2099 PENNSYLVANIA AVNUE, NW, SUITE 1000, WASHINGTON DC 20006
James Alton Hughes	director	350 W WASHINGTON STREET, SUITE 600, TEMPE AZ 85281
Norman P. Becker	director	3900 SINGER BOULEVARD N.E., ALBUQUERQUE NM 87109
Chris M Olson	officer: VP, Utility Operations	414 SILVER AVENUE SW, MS 1255, ALBUQUERQUE NM 87102-3289
Adelmo E Archuleta	director	414 SILVER AVE SW MS 1275, ALBUQUERQUE NM 87102-3289
Ronald E Talbot	officer: SR VP, CHIEF OPERATING OFFICER	414 SILVER AVE SW MS 1275, ALBUQUERQUE NM 87102-3289
Bruce W Wilkinson	director	1333 WEST LOOP SOUTH, STE 1700, HOUSTON TX 77027
Sidney M. Gutierrez	director	414 SILVER AVE SW, MS 1275, ALBUQUERQUE NM 87102-3289
Joan B Woodard	director	414 SILVER AVE SW MS 1275, ALBUQUERQUE NM 87102-3289