Preferred Apartment Communities (Preferred Apartment Communities) Predictability Rank

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What is Preferred Apartment Communities 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.

Preferred Apartment Communities 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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Preferred Apartment Communities (Preferred Apartment Communities) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Real Estate » REITs » Preferred Apartment Communities Inc (NYSE:APTS) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

3284 Northside Parkway NW, Suite 150, Atlanta, GA, USA, 30327

Website

https://www.pacapts.com

Preferred Apartment Communities Inc is a real estate investment trust that acquires and operates multifamily properties in select targeted markets throughout the United States. It operates through the following segments: The Multifamily Communities segment being the highest revenue generating segment; Financing segment refers to the portfolio of real estate loans, bridge loans, other instruments, and other real estate related assets; New Market Properties segment covers a portfolio of grocery-anchored shopping centers, as well as the financial results from the retail real estate loans; and Preferred Office properties segment relates to the office buildings.

Executives

Sara Finley	director	ONE CVS DRIVE, WOONSOCKET RI 02895
Jeffrey David Sherman	officer: PRESIDENT - MULTIFAMILY	3284 NORTHSIDE PARKWAY NW SUITE 150 ATLANTA GA 30327
Michael Aide	officer: PRESIDENT - RETAIL	3284 NORTHSIDE PARKWAY NW SUITE 150 ATLANTA GA 30327
John A Isakson	officer: CHIEF FINANCIAL OFFICER	3284 NORTHSIDE PARKWAY, NW, SUITE 150, ATLANTA GA 30327
Jeffrey R Sprain	officer: EVP, GENERAL COUNSEL AND SEC.	3284 NORTHSIDE PARKWAY, NW, SUITE 150 ATLANTA GA 30327
Daphne Bryson Jackson	director	3284 NORTHSIDE PARKWAY NW SUITE 150 ATLANTA GA 30327
John M Cannon	director	3284 NORTHSIDE PARKWAY NW SUITE 150 ATLANTA GA 30327
Daniel M Dupree	director	2500 WINDY RIDGE PARKWAY SUITE 1600, ATLANTA GA 30339
Parker Boone Dupree	officer: President - Office	3284 NORTHSIDE PARKWAY NW SUITE 150 ATLANTA GA 30327
Joel T Murphy	director, officer: See Remarks	2500 WINDY RIDGE PARKWAY, SUITE 1600, ATLANTA GA 30339
Michael Joseph Cronin	officer: See Remarks	3625 CUMBERLAND BOULDEVARD SUITE 400 ATLANTA GA 30339
Steve Bartkowski	director	3625 CUMBERLAND BOULDEVARD SUITE 400 ATLANTA GA 30339
Gary B Coursey	director
Gresham William J Jr	director	1010 RICHMOND HILL DRIVE MARIETTA GA 30068
Timothy Alan Peterson	director	3625 CUMBERLAND BOULDEVARD SUITE 400 ATLANTA GA 30339