What is Trinseo Predictability Rank?
1 (5)
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.
Trinseo 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
Also read:
Part II: What worked in the market from 1998-2008? Part II: Role of Valuations
Part III: Intrinsic Value, Discounted Cash Flow and Margin of Safety
Trinseo (Trinseo) Business Description
Traded in Other Exchanges
Address
440 East Swedesford Road, Suite 301, Wayne, PA, USA, 19312
Trinseo PLC is a leading global materials company and manufacturer of latex and plastics products. The company's operating segments include latex binders, feedstocks, polystyrene, Americas styrenics, engineered materials, and base plastics. The company is a global leader in styrene-butadiene latex and holds a strong market position in Europe and North America. Base plastics is the business line with the highest net sales and contains compounds and blends for automotive and other applications. Europe accounts for the highest net sales by geography and building and construction/sheet accounts for the highest net sales by end market.
Executives
| Matthew Farrell |
director |
|
| Roger Greene |
officer: VP, GLOBAL CONTROLLER & PAO |
C/O TRINSEO PLC, 440 EAST SWEDESFORD ROAD, SUITE 301, WAYNE PA 19087 |
| David Phillip Stasse |
officer: See Remarks |
C/O FREESCALE SEMICONDUCTOR, INC., 6501 WILLIAM CANNON DRIVE WEST, AUSTIN TX 78735 |
| Jeanmarie F. Desmond |
director |
C/O E.I. DU PONT DE NEMOURS AND COMPANY, 974 CENTRE ROAD, BLDG. 730, WILMINGTON DE 19805 |
| Timothy J Thomas |
officer: Vice President |
C/O TRINSEO S.A., 1000 CHESTERBROOK BLVD., SUITE 300, BERWYN PA 19312 |
| Angelo N. Chaclas |
officer: See Remarks |
C/O TRINSEO S.A., 1000 CHESTERBROOK BOULEVARD, SUITE 300, BERWYN PA 19312 |
| Frank A Bozich |
officer: President and CEO |
PO BOX 1046, SCHENECTADY NY 12301 |
| Philip R Martens |
director |
PLEXUS CORP., ONE PLEXUS WAY, NEENAH WI 54956 |
| Kessel Bregje Van |
officer: SVP, Base Plastics |
440 EAST SWEDESFORD ROAD, SUITE 301, WAYNE PA 19087 |
| Han Hendriks |
officer: Chief Technology Officer |
C/O TRINSEO PLC, 440 EAST SWEDESFORD ROAD, SUITE 301, WAYNE PA 19087 |
| Jeffrey J Cote |
director |
C/O SENSATA TECHNOLOGIES, INC., 529 PLEASANT STREET, ATTLEBORO MA 02703 |
| M&g Investment Management Ltd |
10 percent owner |
10 FENCHURCH AVENUE, LONDON X0 EC3M 5AG |
| Bernard M Skeete |
officer: VP, CAO and Global Controller |
C/O TRINSEO S.A., 1000 CHESTERBROOK BLVD., SUITE 300, BERWYN PA 19312 |
| Joseph Alvarado |
director |
705 N. BAR Y ROAD, P.O. BOX 11368, JACKSON WY 83002 |
| Johanna Frisch |
officer: Treasurer |
C/O TRINSEO PLC, 1000 CHESTERBROOK BLVD., SUITE 300, BERWYN PA 19312 |
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