Lumentum Holdings (Lumentum Holdings) Predictability Rank

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What is Lumentum 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.

Lumentum 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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Lumentum Holdings (Lumentum Holdings) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Technology » Hardware » Lumentum Holdings Inc (NAS:LITE) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

LU2:Germany LU2:Germany

Address

1001 Ridder Park Drive, San Jose, CA, USA, 95131

Website

https://www.lumentum.com

Lumentum Holdings Inc is a California-based technology firm. The company provides two types of optical and photonic products: optical components that are used in telecommunications networking equipment, and commercial lasers for manufacturing, inspection, and life-science lab uses. Its segments are OpComms and Lasers. The firm is also expanding into new optical applications, such as 3-D sensing laser diode for consumer electronics. It generates maximum revenue from the OpComms segment. The OpComms segment products include a wide range of components, modules and subsystems to support customers including carrier networks for access (local), metro (intracity), long-haul, and submarine (undersea) applications.

Executives

Julia Suzanne Johnson	director	1001 RIDDER PARK STREET, SAN JOSE CA 95131
Yuen Wupen	officer: See Remarks	2911 ZANKER ROAD, SAN JOSE CA 95134
Wajid Ali	officer: EVP & Chief Financial Officer	400 N MCCARTHY BLVD, MILPITAS CA 95035
Pamela Fletcher	director	C/O COHERENT, INC., 5100 PATRICK HENRY DRIVE, SANTA CLARA CA 95054
Matthew Joseph Sepe	officer: Chief Accounting Officer	400 NORTH MCCARTHY BLVD, MILPITAS CA 95035
Brian Lillie	director	1485 BROOKMILL ROAD, LOS ALTOS CA 94024
Alan S Lowe	director, officer: Chief Executive Officer	400 NORTH MCCARTHY BLVD, MILPITAS CA 95035
Judy G Hamel	officer: SVP, GC and Secretary	400 MCCARTHY BLVD, MILPITAS CA 95035
Penny Herscher	director	1001 RIDDER PARK DRIVE, SAN JOSE CA 95131
Isaac Hosojiro Harris	director	310 W 113TH ST # 801, NEW YORK NY 10026-3389
Vincent Retort	officer: EVP, Chief Operating Officer	400 MCCARTHY BLVD, MILPITAS CA 95035
Harold L Covert	director	400 NORTH MCCARTHY BLVD, MILPITAS CA 95035
Jason Reinhardt	officer: EVP, Global Sales	400 N. MCCARTHY BLVD, MILPITAS CA 95035
Janet S. Wong	director	2510 LAKE FRONT CIRCLE, THE WOODLANDS TX 77380-1576
Samuel F Thomas	director	400 N MCCARTHY BLVD, MILPITAS CA 95035