Archaea Energy (Archaea Energy) Predictability Rank

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What is Archaea Energy Predictability Rank?

Not Rated

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.

Archaea Energy 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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Archaea Energy (Archaea Energy) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Utilities » Utilities - Independent Power Producers » Archaea Energy Inc (NYSE:LFG) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

4444 Westheimer Road, Suite G450, Houston, TX, USA, 77027

Website

https://www.archaeaenergy.com

Archaea Energy Inc is a renewable natural gas (RNG) producer in the U.S., with an RNG platform developing, constructing, and operating RNG facilities to capture waste emissions and convert them into low-carbon fuel.

Executives

Ares Management Llc	director, 10 percent owner	2000 AVENUE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067
United States Power Fund Iii, L.p.	director, 10 percent owner	2000 AVENUE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067
Edward P. Taibi	officer: GC, EVP Strat Init & Gov Aff	35 EAST 62ND STREET, NEW YORK NY 10065
Brian F Mccarthy	officer: Chief Investment Officer	C/O RICE ACQUISITION, 500 TECHNOLOGY DRIVE, 2ND FLOOR, CANONSBURG PA 15317
Aria Renewable Energy Systems Llc	director, 10 percent owner	2000 AVENUE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067
Ares Management Corp	director, 10 percent owner	2000 AVE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067
Archaea Energy Llc	10 percent owner	500 TECHNOLOGY DRIVE, SECOND FLOOR, CANONSBURG PA 15317
Shalennial Fund I, L.p.	10 percent owner	102 EAST MAIN STREET, SECOND STORY, CARNEGIE PA 15106
Richard Walton	officer: President	C/O RICE ACQUISITION, 500 TECHNOLOGY DRIVE, 2ND FLOOR, CANONSBURG PA 15317
Nicholas Stork	director, officer: Chief Executive Officer	C/O RICE ACQUISITION, 500 TECHNOLOGY DRIVE, 2ND FLOOR, CANONSBURG PA 15317
Lindsay Ellis	officer: General Counsel and Secretary	C/O RICE ACQUISITION, 500 TECHNOLOGY DRIVE, 2ND FLOOR, CANONSBURG PA 15317
Chad Bellah	officer: Chief Accounting Officer	C/O RICE ACQUISITION, 500 TECHNOLOGY DRIVE, 2ND FLOOR, CANONSBURG PA 15317
Eif Us Power Iv, Llc	director, 10 percent owner	2000 AVENUE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067
Eif Us Power Iii, Llc	director, 10 percent owner	2000 AVENUE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067
Scott Parkes	director	C/O ARES MANAGEMENT CORP., 2000 AVENUE OF THE STARS, 12TH FLOOR, LOS ANGELES CA 90067