Highwater Ethanol LLC (Highwater Ethanol LLC) Predictability Rank

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What is Highwater Ethanol LLC 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.

Highwater Ethanol LLC 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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Highwater Ethanol LLC (Highwater Ethanol LLC) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Energy » Oil & Gas » Highwater Ethanol LLC (GREY:HEOL) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

24500 US Highway 14, P.O. Box 96, Lamberton, MN, USA, 56152

Website

http://www.highwaterethanol.com

Highwater Ethanol LLC is engaged in the production of ethanol and distillers grains at the plant. It focuses on the manufacturing and marketing of fuel-grade ethanol and the co-products of the ethanol production process. Its products include fuel-grade ethanol, distillers grains, and corn oil. The company produces and sells fuel ethanol and co-products of the fuel ethanol production process in the continental United States.

Executives

Gerald R Forsythe	director	600 N BUFFALO GROVE RD, BUFFALO GROVE IL 60089
Mark Warren Pankonin	director	23620 COUNTY ROAD 4 LAMBERTON MN 56152
David Richard Eis	officer: Governor	26116 GARDEN AVE WABASSO MN 56293
Lucas Grant Schneider	officer: Chief Financial Officer	2858 LINDEN AVENUE SLAYTON MN 56172
Luke T Spalj	other: Govenor	1360 POST OAK BLVD, STE 2100, HOUSTON TX 77056
Scott A Brittenham	director	4400 E. BROADWAY SUITE 600 TUSCON AZ 85711
Rex Roehl	director	600 NORTH BUFFALO GROVE ROAD, SUITE 300 BUFFALO GROVE IL 60089
Mark W Peterson	officer: CFO	712 W VICTORY LANE SIOUX FALLS SD 57108
Jason Ray Fink	director	3903 COVEY TR MINNETRISTA MN 55375
George Michael Goblish	director	32866 DAYTON AVENUE VESTA MN 56292
Ronald Eric Jorgenson	director	33689 CO ROAD 4 JEFFERS MN 56145
Brian D Kletscher	director, officer: CEO	26161 140TH ST LAMBERTON MN 56152
Michael John Landuyt	director	13526 CAMP AVENUE WALNUT GROVE MN 56180
Todd Allen Reif	director	123 SAVANNAH HEIGHTS BLVD LYND MN 56175
Monica Rose Anderson	director	2736 211TH STREET WALNUT GROVE MN 56180

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