Stifel Financial (Stifel Financial) Predictability Rank

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What is Stifel Financial 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.

Stifel Financial 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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Stifel Financial (Stifel Financial) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Capital Markets » Stifel Financial Corp (NYSE:SF) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

SFpD.PFD:USA SFpC.PFD:USA SFpB.PFD:USA 2SI:Germany

Address

501 North Broadway, One Financial Plaza, Saint Louis, MO, USA, 63102-2188

Website

https://www.stifel.com

Stifel Financial is a middle-market-focused investment bank that produces more than 90% of its revenue in the United States. Approximately 60% of the company's net revenue is derived from its global wealth management division, which supports over 2,000 financial advisors, with the remainder coming from its institutional securities business. Stifel has a history of being an active acquirer of other financial service firms.

Executives

Mark P Fisher	officer: SENIOR VP & GENERAL COUNSEL	C/O THOMAS WEISEL PARTNERS GROUP, INC., ONE MONTGOMERY STREET, SUITE 3700, SAN FRANCISCO CA 94104
Christopher K Reichert	officer: CEO of Stifel Bank & Trust	C/O PULASKI FINANCIAL CORP, 12300 OLIVE BLVD, ST LOUIS MO 63141
Thomas B. Michaud	director	C/O KBW, INC., 787 SEVENTH AVENUE, NEW YORK NY 10019
Lisa Landau Carnoy	director	501 NORTH BROADWAY, ST. LOUIS MO 63102
Maryam S. Brown	director	555 W. 5TH STREET, LOS ANGELES CA 90013
James M Zemlyak	officer: CHIEF FIN'L & ADMIN OFFCR	501 NORTH BROADWAY, ST LOUIS MO 63102
Ronald J Kruszewski	director, officer: CHIEF EXECUTIVE OFFICER	501 NORTH BROADWAY, ST LOUIS MO 63102
James P. Kavanaugh	director	501 NORTH BROADWAY, ST. LOUIS MO 63102
Victor Nesi	director, officer: Director	650 MADISON AVENUE, 19TH FLOOR, NEW YORK NY 10022
James M Oates	director	C/O INVESTORS FINANCIAL SERVICES CORP, 200 CLARENDON ST, BOSTON MA 02116
Thomas W Weisel	director
David D Sliney	officer: Dir Strategic Planning & Tech, other: Dir Strategic Planning & Tech	501 NORTH BROADWAY, ST LOUIS MO 63102
Robert Edward Grady	director	555 CALIFORNIA STREET, SUITE 3450, SAN FRANCISCO CA 94104
John P Dubinsky	director	C/O INSITUFORM TECHNOLOGIES, INC., 17988 EDISON AVENUE, CHESTERFIELD MO 63005
David A Peacock	director	190 CARONDELET PLAZA, CLAYTON MO 63105