Issuer Direct (Issuer Direct) Predictability Rank

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What is Issuer Direct 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.

Issuer Direct 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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Issuer Direct (Issuer Direct) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Software » Issuer Direct Corp (AMEX:ISDR) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

IDE:Germany

Address

One Glenwood Avenue, Suite 1001, Raleigh, NC, USA, 27603

Website

https://www.issuerdirect.com

Issuer Direct Corp is a communications and compliance company. It focuses on the needs of corporate issuers. It provides disclosure management solutions, shareholder communications tools, and cloud-based compliance technologies. The company serves a diverse range of client base in the financial services industry, including brokerage firms, banks, mutual funds, accounting and the legal communities. Its current brands and products include the following: Issuer Direct, Accesswire, Investor Network, Blueprint, Classify, iProxy Direct, iR Direct and annual report service. Its primary geographic markets are North America and Europe of which North America contributes the vast majority of total revenue.

Executives

Brian R Balbirnie	director, 10 percent owner, officer: Chairman & CEO	C/O ISSUER DIRECT CORP., 500 PERIMETER PARK DRIVE, SUITE D, MORRISVILLE NC 27560
J. Patrick Galleher	director	11 S. 12TH STREET, RICHMOND VA 23219
William H Everett	director	6 ARROWWOOD LANE, ANDOVER MA 01810
Steven Winfield Knerr	officer: Chief Financial Officer	500 PERIMETER PARK DRIVE, SUITE D, MORRISVILLE NC 27560
Timothy Pitoniak	officer: Chief Financial Officer	8651 10TH ST N, APT 132, ST. PETERSBURG FL 33702
Marti Beller Lazear	director	1000 CENTRAL AVENUE, ST. PETERSBURG FL 33705
Graeme P. Rein	director	221 WILCOX ST, SUITE A, CASTLE ROCK CO 80104
Eric Alan Frank	director	23 WASHINGTON AVENUE, IRVINGTON NY 10533
Michael Joseph Nowlan	director	336 GLENGARRY AVE., NORTH YORK A6 M5M1E6
Red Oak Partners, Llc	10 percent owner	95 S. FEDERAL HWY, SUITE 201, BOCA RATON FL 33432
Wesley T Pollard	officer: Chief Financial Officer	10109 SPORTING CLUB DR, RALEIGH NC 27617
James Michael	10 percent owner	5321 RIDGELOCH PLACE, RALEIGH NC 27612
David Sandberg	director	40 SE 5TH STREET, SUITE 502, BOCA RATON FL 33432
Andre Boisvert	director	46939 BAYSIDE PKWY, FREMONT CA 94538
Lori A Jones	officer: Chief Executive Officer	8310 N. NEW BRAUNFELS, SUITE 205, SAN ANTONIO TX 78217