What is Sculptor Capital Management 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.
Sculptor Capital Management 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
Sculptor Capital Management (Sculptor Capital Management) Business Description
Traded in Other Exchanges
N/A
Address
9 West 57th Street, New York, NY, USA, 10019
Sculptor Capital Management Inc is an alternative asset management firm. The company provides asset management services to its customers. It manages multi-strategy funds, dedicated credit funds, including opportunistic credit funds and Institutional Credit Strategies products, real estate funds and other alternative investment vehicles.
Executives
| Rithm Capital Corp. |
10 percent owner |
799 BROADWAY, New York NY 10003 |
| Wayne Cohen |
officer: Executive Managing Director |
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC, 9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| Charmel Maynard |
director |
9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| Dubai Holding Llc |
10 percent owner |
EMIRATES TOWERS, OFFICES, LEVEL 49, PO BOX 73311, DUBAI C0 00000 |
| Meghna R. Desai |
director |
C/O SCULPTOR CAPITAL, 9 W 57TH STREET, NEW YORK NY 10019 |
| David Bonanno |
director |
390 PARK AVENUE, NEW YORK NY 10022 |
| David Michael Levine |
officer: Chief Legal Officer |
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC, 9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| Dava Ritchea |
officer: Chief Financial Officer |
9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| Bharath Srikrishnan |
director |
9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| Abrams Capital Management, L.p. |
10 percent owner |
222 BERKELEY STREET, 21ST FLOOR, BOSTON MA 02116 |
| Georganne Proctor |
director |
1 BELVEDERE PLACE, SUITE 300, MILL VALLEY CA 94941 |
| Herbert Alvin Pollard |
officer: Chief Accounting Officer |
9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| James Morgan Rutman |
director |
9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
| Thomas Michael Sipp |
officer: Chief Financial Officer |
9 WEST 57TH STREET, NEW YORK NY 10019 |
| Erez Elisha |
officer: Chief Accounting Officer |
OCH-ZIFF CAPITAL MANAGEMENT GROUP LLC, 9 WEST 57TH STREET, 39TH FLOOR, NEW YORK NY 10019 |
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