Lincoln Electric Holdings (Lincoln Electric Holdings) Predictability Rank

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What is Lincoln Electric Holdings 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.

Lincoln Electric Holdings 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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Lincoln Electric Holdings (Lincoln Electric Holdings) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Industrial Products » Lincoln Electric Holdings Inc (NAS:LECO) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

LNE:Germany

Address

22801 Street Clair Avenue, Cleveland, OH, USA, 44117

Website

https://www.lincolnelectric.com

Lincoln Electric is a leading manufacturer of welding, cutting, and brazing products. The firm's portfolio of products includes arc-welding solutions, plasma and oxy-fuel cutting systems, and brazing and soldering alloys, as well as automation solutions. Lincoln Electric serves clients in the general fabrication, heavy industries, automotive, construction, shipbuilding, energy and process industries, among other end markets. Based in Cleveland, Ohio, Lincoln Electric has operations in 19 countries and has 11,000 employees worldwide. The company generated roughly $3.8 billion in sales in 2022.

Executives

Michael J Whitehead	officer: SVP, Strat. & Business Dev.	22801 SAINT CLAIR AVENUE, CLEVELAND OH 44117
Christopher L Mapes	director	REGAL BELOIT CORP, 200 STATE STREET, BELOIT WI 53511
Steven B Hedlund	officer: V. P. Strategy & Bus. Dev.	22801 ST. CLAIR AVENUE, CLEVELAND OH 44117
Geoffrey P Allman	officer: Sr. V.P., Corporate Controller	22801 ST. CLAIR AVENUE, CLEVELAND OH 44117
Michele R Kuhrt	officer: Ex. V.P., CIO	22801 SAINT CLAIR AVENUE, CLEVELAND OH 44117
Marc A Howze	director	DEERE & COMPANY, ONE JOHN DEERE PLACE, MOLINE IL 61265
Jennifer I Ansberry	officer: Ex.V.P. General Counsel & Secy	22801 SAINT CLAIR AVENUE, CLEVELAND OH 44117
Bonnie J Fetch	director	500 JACKSON STREET, COLUMBUS IN 47201
Kathryn Jo Lincoln	director	1741 EAST MORTEN AVE, PHOENIX AZ 85020
Peter M. Pletcher	officer: SVP, President International	22801 SAINT CLAIR AVENUE, CLEVELAND OH 44117
Gregory Doria	officer: SVP, Pres Harris Products Gr.	22801 SAINT CLAIR AVENUE, CLEVELAND OH 44117
Gabriel Bruno	officer: V.P., Corporate Controller	22801 ST. CLAIR AVENUE, CLEVELAND OH 44117
Lisa Dietrich	officer: EVP, CIO	22801 SAINT CLAIR AVENUE, CLEVELAND OH 44117
Brian Chambers	director	ONE OWENS CORNING PARKWAY, TOLEDO OH 43659
Thomas A Flohn	officer: VP; Pres. (Asia Pac.)	22801 ST. CLAIR AVENUE, CLEVELAND OH 44117