What is Heron Therapeutics 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.
Heron Therapeutics 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
Heron Therapeutics (Heron Therapeutics) Business Description
Traded in Other Exchanges
Address
4242 Campus Point Court, Suite 200, San Diego, CA, USA, 92121
Heron Therapeutics Inc is a commercial-stage biotechnology company. It is focused on improving the lives of patients by developing treatments that address some of the unmet patient needs. The company's product portfolio consists of SUSTOL, ZYNRELEF, and CINVANTI. Its pipeline product is HTX-011.
Executives
| William P Forbes |
officer: EVP, Chief Development Officer |
C/O SALIX PHARMACEUTICALS, LTD., 8510 COLONNADE CENTER DRIVE, RALEIGH NC 27615 |
| Adam Morgan |
other: See Footnote 2 |
1055B POWERS PLACE, ALPHARETTA GA 30009 |
| Ira Duarte |
officer: EVP, Chief Financial Officer |
1255 CRESCENT GREEN DRIVE, SUITE 250, CARY NC 27518 |
| Craig A Collard |
director |
C/O CORNERSTONE THERAPEUTICS INC., 1255 CRESCENT GREEN DRIVE, SUITE 250, CARY NC 27518 |
| Kevin Kotler |
director |
C/O BROADFIN CAPITAL, LLC, 300 PARK AVENUE, 25TH FLOOR, NEW YORK NY 10022 |
| Velan Capital Master Fund Lp |
other: See Footnote 2 |
1055B POWERS PLACE, ALPHARETTA GA 30009 |
| Velan Capital Management Llc |
other: See Footnote 2 |
1055B POWERS PLACE, ALPHARETTA GA 30009 |
| Velan Capital Holdings Llc |
other: See Footnote 2 |
1055B POWERS PLACE, ALPHARETTA GA 30009 |
| Velan Capital Investment Management Lp |
other: See Footnote 2 |
1055B POWERS PLACE, ALPHARETTA GA 30009 |
| David Efraim Rosen |
other: See Footnote 1 |
155 EAST 44TH ST., SUITE 1630, NEW YORK NY 10017 |
| Rubric Capital Management Lp |
other: See Footnote 1 |
155 EAST 44TH ST, SUITE 1630, NEW YORK NY 10017 |
| Balaji Venkataraman |
other: See Footnote 2 |
FIRST HORIZON PHARMACEUTICAL CORP, 660 HEMBREE PKWY STE 106, ROSWELL GA 30076 |
| Kimberly Manhard |
director |
C/O HERON THERAPEUTICS, INC, 4242 CAMPUS POINT COURT, SUITE 200, SAN DIEGO CA 92121 |
| Craig A Johnson |
director |
C/O PURE BIOSCIENCE, 1725 GILLESPIE WAY, EL CAJON CA 92020 |
| Waage Christian |
director |
RECEPTOS, INC., 10835 ROAD TO THE CURE, SUITE 205, SAN DIEGO CA 92121 |
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