What is Rocky Mountain Chocolate Factory Predictability Rank?
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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.
Rocky Mountain Chocolate Factory 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
Rocky Mountain Chocolate Factory (Rocky Mountain Chocolate Factory) Business Description
Traded in Other Exchanges
Address
265 Turner Drive, Durango, CO, USA, 81303
Rocky Mountain Chocolate Factory Inc operates as a manufacturer of chocolate candies and confectionery products. The business activity of the firm functions through Franchising, Manufacturing, Retail Stores, U-Swirl Operations, and Other segments. Its products include varieties of Clusters, Caramels, Creams, Toffees, Mints, and Truffles. Geographically, the company and its subsidiaries have stores in Canada, South Korea, Panama, the Philippines, Qatar, and other countries.
Executives
| Robert J Sarlls |
director, officer: Chief Executive Officer |
1703 N. RANDALL ROAD, ELGIN IL 60123-7820 |
| Global Value Investment Corp. |
10 percent owner |
1433 N WATER STREET, SUITE 549, MILWAUKEE WI 53202 |
| Geygan Jeffrey Richart Geygan |
director |
1433 N WATER STREET, SUITE 549, MILWAUKEE WI 53202 |
| Brett P Seabert |
director |
265 TURNER DRIVE, DURANGO CO 81303 |
| A Allen Arroyo |
officer: CFO |
C/O ROCKY MOUNTAIN CHOCOLATE FACTORY, 265 TURNER DRIVE, DURANGO CO 81303 |
| Gvp 2021-a, Llc |
other: GVIC-Controlled Entity |
1433 N WATER STREET, SUITE 400, MILWAUKEE WI 53202 |
| Gvp 2021-a, L.p. |
other: GVIC-Controlled Entity |
1433 N WATER STREET, SUITE 400, MILWAUKEE WI 53202 |
| Kathleen Geygan |
other: Director of GVIC |
1433 N WATER STREET, SUITE 549, MILWAUKEE WI 53202 |
| Stacy Wilke |
other: Officer of GVIC |
1433 N WATER STREET, SUITE 549, MILWAUKEE WI 53202 |
| James Geygan |
other: Officer of GVIC |
1433 N WATER STREET, SUITE 549, MILWAUKEE WI 53202 |
| Mark O Riegel |
director |
265 TURNER DRIVE, DURANGO CO 81303 |
| Andrew Berger |
other: See Explanation of Responses |
84 ELM STREET, WESTFIELD NJ 07090 |
| Richard Degnan |
other: See footnote 1 |
2101 FREDRICK DOUGLAS BLVD, NEW YORK NY 10026 |
| Suchit Majmudar |
other: See footnote 1 |
1200 SOUTH GARFIELD STREET, DENVER CO 80210 |
| Mary Bradley |
other: See footnote 1 |
103 ST ANDREWS PLACE, NEWTOWN PA 18940 |
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