What is Hamilton Lane Predictability Rank?
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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.
Hamilton Lane 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
Hamilton Lane (Hamilton Lane) Business Description
Traded in Other Exchanges
Address
110 Washington Street, Suite 1300, Conshohocken, PA, USA, 19428
Hamilton Lane Inc is a private market investment solutions provider in the United States. It works with its clients to conceive, structure, build out, manage and monitor portfolios of private markets funds and direct investments, and it helps them access a set of such investment opportunities around the world. The company offers a range of investment solutions across a range of private markets, including private equity, private credit, real estate, infrastructure, natural resources, growth equity and venture capital.
Executives
| Drew Thomas Carl |
officer: Principal Accounting Officer |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428-2053 |
| Atul Varma |
officer: Chief Financial Officer |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Jeffrey Brian Armbrister |
officer: Chief Financial Officer |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428-2053 |
| Oakville Number 2 Trust |
10 percent owner |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Reynoldo Vann Graves |
director |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Juan Delgado-moreira |
10 percent owner, officer: Managing Director |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Hartley R. Rogers |
director, 10 percent owner, officer: Chairman |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Leslie F Varon |
director |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Tara Blackburn |
10 percent owner |
ONE PRESIDENTIAL BOULEVARD, 4TH FLOOR, BALA CNYWYD PA 19004 |
| Michael John Kelly |
10 percent owner |
ONE PRESIDENTIAL BOULEVARD, 4TH FLOOR, BALA CYNWYD PA 19004 |
| Edward B. Whittemore |
10 percent owner |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| Laurence Whittemore |
10 percent owner |
ONE PRESIDENTIAL BOULEVARD, 4TH FLOOR, BALA CYNWYD PA 19004 |
| Initial Trust Under The Frederick B. Whittemore 2008 Children's Trust Agreement Dated 11/25/2008 |
10 percent owner |
ONE PRESIDENTIAL BOULEVARD, 4TH FLOOR, BALA CYNWYD PA 19004 |
| 2008 Sexton Des. Trust Fbo Laura Sexton |
10 percent owner |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
| 2008 Sexton Des. Trust Fbo Matthew Sexton |
10 percent owner |
110 WASHINGTON STREET, SUITE 1300, CONSHOHOCKEN PA 19428 |
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