What is Western Asset Investment Gradeome Fund 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.
Western Asset Investment Gradeome Fund 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
Western Asset Investment Gradeome Fund (Western Asset Investment Gradeome Fund) Business Description
Traded in Other Exchanges
N/A
Address
620 Eighth Avenue, 47th Floor, New York, MA, USA, 10018
Western Asset Investment Grade Income Fund Inc is a closed-end diversified investment company. The company designed primarily as a long-term investment and not as a trading vehicle. The fund seeks a high level of current income, consistent with prudent investment risk, through investment in a diversified portfolio of debt securities. Its portfolio is invested in securities which may be convertible into or exchangeable for, or carry warrants to purchase, common stock or other equity interests; and preferred stock.
Executives
| Hoffmann Courtney A. |
other: Secretary/GC Subadviser |
WESTERN ASSET MANAGEMENT COMPANY, LLC, 385 EAST COLORADO BOULEVARD, PASADENA CA 91101 |
| Andrew J. Bowden |
other: COO/Subadviser |
WESTERN ASSET MANAGEMENT COMPANY, LLC, 385 EAST COLORADO BOULEVARD, PASADENA CA 91101 |
| Oliveira Marc De |
officer: Secretary / Chief LGL Officer |
C/O LEGG MASON & CO. LLC, ONE FIRST STAMFORD PLACE, STAMFORD CT 06902 |
| Matthew Nicholls |
other: Director of Investment Adviser |
ONE FRANKLIN PARKWAY, SAN MATEO CA 94403 |
| Jed A. Plafker |
other: Director of Investment Adviser |
ONE FRANKLIN PARKWAY, SAN MATEO CA 94403 |
| Jennifer M Johnson |
other: Director of Investment Adviser |
C/O FRANKLIN RESOURCES, INC., ONE FRANKLIN PARKWAY, SAN MATEO CA 94403-1906 |
| Michael Larson |
director |
2365 CARILLON POINT, KIRKLAND WA 98033 |
| Ronald L Olson |
director |
EDISON INTERNATIONAL, 2244 WALNUT GROVE AVENUE, ROSEMEAD CA 91770 |
| Susan B Kerley |
director |
51 MADISON AVENUE, NEW YORK NY 10010 |
| Jane F Dasher |
director |
KORSNAT PARTNERS, 283 GREENWICH AVE 3RD FL, GREENWICH CT 06830 |
| Christopher Berarducci |
officer: Treas/Principal Finan Officer |
LEGG MASON, 620 EIGHTH AVENUE, NEW YORK NY 10018 |
| Ted P Becker |
officer: Chief Compliance Officer |
399 PARK AVENUE, 4TH FLOOR, NEW YORK NY 10022 |
| Peter J. Taylor |
director |
2244 WALNUT GROVE AVENUE, ROSEMEAD CA 91770 |
| S. Kenneth Leech |
other: Portfolio Manager - Adviser |
385 EAST COLORADO BLVD, PASADENA CA 91101 |
| John Kenney |
other: Director of Subadviser |
100 INTERNATIONAL DRIVE, BALTIMORE MD 21202 |
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