Terex (TEX) Predictability Rank

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What is Terex 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.

Terex 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

Terex Predictability Rank Related Terms

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Terex (TEX) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Farm & Heavy Construction Machinery » Terex Corp (NYSE:TEX) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

TXG:Germany TXG:Germany

Address

45 Glover Avenue, 4th Floor, Norwalk, CT, USA, 06850

Website

https://www.terex.com

Terex is a global manufacturer of aerial work platforms, materials processing equipment, and specialty equipment, such as material handlers, cranes, and concrete mixer trucks. Its current composition is a result of numerous acquisitions over several decades and a recent shift to focus on its two core segments after divesting a handful of underperforming businesses. Terex's remaining segments see heavy demand in nonresidential construction as well as in maintenance, manufacturing, energy, and materials management.

Executives

Garrison John L Jr	officer: CEO AND PRESIDENT	C/O TEREX CORPORATION, 200 NYALA FARM ROAD, WESTPORT CT 06880
Amy George	officer: Senior V.P. Human Resources	C/O TEREX CORPORATION, 200 NYALA FARMS ROAD, WESTPORT CT 06880
Stephen Johnston	officer: Chief Accounting Officer	C/O TEREX CORP, 200 NYALA FARM ROAD, WESTPOT CT 06880
David A Sachs	director	C/O TEREX CORP, 200 NYALA FARM ROAD, WESTPORT CT 06880
Julie A Beck	officer: Senior Vice President, Finance	ONE INVACARE WAY, ELYRIA OH 44035
Andra Rush	director	C/O TEREX CORPORATION, 200 NYALA FARM ROAD, WESTPORT CT 06880
Oluseun Salami	director	C/O TEREX CORPORATION, 45 GLOVER AVENUE, NORWALK CT 06850
Kieran Hegarty	officer: President, Materials Processin	C/O TEREX CORPORATION, 200 NYALA FARM ROAD, WESTPORT CT 06880
Simon Meester	officer: President - Genie	C/O TEREX CORP, 45 GLOVER AVENUE, 4TH FLOOR, NORWALK CT 06850
Scott Posner	officer: Senior V.P., Gen Counsel Sec.	C/O TEREX CORPORATION, 200 NYALA FARM ROAD, WESTPORT CT 06880
Paula H Cholmondeley	director	221 W PHILADELPHIA ST, SUITE 60W, YORK PA 17401-2991
John D Sheehan	officer: Senior Vice President, CFO	5725 DELPHI DRIVE, TROY MI 48098
Mark I Clair	officer: VP Controller & CAO	C/O HEXCEL CORPORATION, 281 TRESSER BOULEVARD, STAMFORD CT 06901
Christopher Rossi	director	C/O KENNAMETAL INC., 525 WILLIAM PENN PLACE, 33RD FLOOR, PITTSBURGH PA 15219
Matthew Fearon	officer: President Terex AWP	C/O TEREX CORPORATION, 200 NYALA FARM ROAD, WESTPORT CT 06880