Royce Micro-Cap Trust (Royce Micro-Cap Trust) Predictability Rank

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What is Royce Micro-Cap Trust Predictability Rank?

Not Rated

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.

Royce Micro-Cap Trust 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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Royce Micro-Cap Trust (Royce Micro-Cap Trust) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Asset Management » Royce Micro-Cap Trust Inc (NYSE:RMT) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

745 Fifth Avenue, New York, NY, USA, 10151

Website

https://www.royceinvest.com

Royce Micro-Cap Trust Inc is a diversified closed-end investment company. The company is engaged in investing in micro-cap securities. It invests in the consumer discretionary sector including auto components, automobiles, diversified consumer services, hotels, restaurants and leisure, household durables, internet and catalog retail, leisure products, media, multiline retail, textiles, apparel, and luxury goods, Consumer staples sector including beverages, food, and staples retailing, food products, and personal products, Energy sector including energy equipment and services, and oil, gas, and consumable fuels. The company also invests in other sectors including healthcare, financials, industrials, IT, telecommunications, and materials.

Executives

Julia Ward Poston	director	C/O ROYCE & ASSOCIATES, 745 FIFTH AVENUE, SUITE 2300, NEW YORK NY 10151
Christopher C. Grisanti	director	745 FIFTH AVENUE, SUITE 2300, NEW YORK NY 10151
O Byrne Daniel A	officer: Vice President, other: VP - Investment Advisor	ROYCE & ASSOCIATES, 745 FIFTH AVENUE, NEW YORK NY 10151
G Peter Obrien	director	C/O ROYCE & ASSOCIATES, LLC, 745 FIFTH AVENUE, NEW YORK NY 10151
Michael K. Shields	director	C/O ROYCE & ASSOCIATES, LLC, 745 FIFTH AVENUE, SUITE 2300, NEW YORK NY 10151
Christopher D Clark	officer: Vice President, other: President - Investment Advisor	745 FIFTH AVENUE, SUITE 2400, NEW YORK NY 10151
Cecile Burleigh Harper	director	C/O ROYCE & ASSOCIATES, 745 FIFTH AVENUE, SUITE 2300, NEW YORK NY 10151
Charles M Royce	director, officer: President, other: President-Investment Adviser	C/O ROYCE & ASSOCIATES, LLC, 745 FIFTH AVENUE, NEW YORK NY 10151
John E Denneen	officer: Secretary, other: Secretary-Investment Adviser	C/O ROYCE & ASSOCIATES LLC, 745 FIFTH AVENUE, NEW YORK NY 10151
Richard M Galkin	director, other: Director through 2/26/2016.	C/O ROYCE & ASSOCIATES, LLC, 745 FIFTH AVENUE, NEW YORK NY 10151
Arthur S Mehlman	director	C/O ROYCE & ASSOCIATES, 745 FIFTH AVENUE, NEW YORK NY 10151
John D Diederich	officer: Vice President & Treasurer, other: COO & CFO - Investment Adviser	ROYCE & ASSOCIATES LLC, 745 FIFTH AVENUE, NEW YORK NY 10151
Peter K Hoglund	officer: Treasuer, other: CFO Investment Advisor	745 FIFTH AVENUE, SUITE 2300, NEW YORK NY 10151
W Whitney George	director, officer: Vice President, other: VP-Royce, through 11/10/2014	C/O ROYCE & ASSOCIATES, LLC, 745 FIFTH AVENUE, NEW YORK NY 10151
Fockler Jack E. Jr.	officer: Vice President, other: VP - Investment Advisor	C/O ROYCE & ASSOCIATES, LLC, 745 FIFTH AVENUE, NEW YORK NY 10151