What is TransUnion Predictability Rank?
1 (5)
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.
TransUnion 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
TransUnion (TransUnion) Business Description
Traded in Other Exchanges
Address
555 West Adams Street, Chicago, IL, USA, 60661
TransUnion is one of the leading credit bureaus in the United States, providing the consumer information that is the basis for granting credit. The company also provides fraud detection, marketing, and analytical services. TransUnion operates in over 30 countries, and about a quarter of its revenue comes from international markets.
Executives
| Thomas L Monahan |
director |
2000 PENNSYLVANIA AVE NW, WASHINGTON DC 20006 |
| Linda Zukauckas |
director |
200 VESEY STREET, NEW YORK NY 10285 |
| Steven M Chaouki |
officer: EVP - US Markets |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Jennifer A. Williams |
officer: SVP, Chief Accounting Officer |
1950 HASSELL ROAD, HOFFMAN ESTATES IL 60169-6308 |
| Richard Dane Mauldin |
officer: EVP - Operations |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Abhi Dhar |
officer: EVP, Chief Info & Tech Officer |
C/O HAWAIIAN AIRLINES INC, 3375 KOAPAKA STREET SUITE G-350, HONOLULU HI 96819 |
| Todd C. Skinner |
officer: President, International |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| William Bosworth |
director |
C/O TABLEAU SOFTWARE, INC., 837 N. 34TH ST., SUITE 200, SEATTLE WA 98103 |
| George M Awad |
director |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Ravi Kumar Singisetti |
director |
9405 SW GEMINI DRIVE, BEAVERTON OR 97008 |
| Heather J Russell |
officer: EVP, Chief Legal Officer |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Christopher A Cartwright |
officer: EVP - US Information Service |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Hamidou Dia |
director |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Karen E Krause |
officer: EVP, Strategy & Communications |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
| Todd M Cello |
officer: EVP & CFO |
C/O TRANSUNION, 555 WEST ADAMS STREET, CHICAGO IL 60661 |
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