Special Opportunities Fund (Special Opportunities Fund) Predictability Rank

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What is Special Opportunities 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.

Special Opportunities 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

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Special Opportunities Fund (Special Opportunities Fund) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Asset Management » Special Opportunities Fund Inc (NYSE:SPE) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

N/A

Address

615 East Michigan Street, Milwaukee, WI, USA, 53202

Website

https://www.specialopportunitiesfundinc.com

Special Opportunities Fund Inc is the United States based closed-end diversified management investment company. Its investment objective is to have the total return. The company's investment portfolio consists of investment companies, common stocks, money market funds, commodity partnerships, preferred stocks, convertible bonds, liquidating trusts, promissory notes, senior unsecured notes, warrants, rights, corporate notes and corporate bonds. In addition, it also makes investments in construction materials, consumer finance, healthcare equipment and supplies, independent power and renewable electricity producers, insurance, personal products, professional services and real estate investment trusts.

Executives

Phillip Goldstein	director, officer: Chairman and Secretary	60 HERITAGE DRIVE, PLEASANTVILLE NY 10570
Gerald Hellerman	director, officer: CCO	5431 NW 21ST AVE., BOCA RATON FL 33496
Rajeev P Das	officer: Vice President	250 PEHLE AVE., SUITE 708, SADDLE BROOK NJ 07663
Charles C Walden	director	C/O INSURED MUNICIPAL INCOME FUND INC., 615 EAST MICHIGAN STREET, MILWAUKEE WI 53202
Marc Lunder	director	C/O SPECIAL OPPORTUNITIES FUND, INC., 615 EAST MICHIGAN STREET, MILWAUKEE WI 53202
Ben H Harris	director	C/O US BANCORP FUND SERVICES, 777 EAST WISCONSIN AVE., MILWAUKEE WI 53202
Andrew Dakos	director, officer: President	250 PEHLE AVE., SUITE 708, SADDLE BROOK NJ 07663
Steven Samuels	other: Investment Adviser Principal	72 COLEYTOWN ROAD, WESTPORT CT 06882
Stephanie Darling	other: Officer of the Inv. Adviser	250 PEHLE AVE., SUITE 708, SADDLE BROOK NJ 07663
James M Chadwick	director	C/O IMPERIAL HOLDINGS, INC., 701 PARK OF COMMERCE BLVD., #301, BOCA RATON FL 33487
Relative Value Partners, Llc	10 percent owner	1033 SKOKIE BOULEVARD, SUITE 470, NORTHBROOK IL 60062
Karpus Management, Inc.	10 percent owner	183 SULLY'S TRAIL, PITTSFORD NY 14534
Investors Bulldog	10 percent owner	PARK 80 WEST PLAZA TWO, SUITE 750, SADDLE BROOK NJ 07663
Full Value Advisors Llc	10 percent owner	PARK 80 WEST, 250 PEHLE AVE., SUITE 708, SADDLE BROOK NJ 07663
Ag Ubs	10 percent owner	600 WASHINGTON BLVD., STAMFORD CT 06901