Albemarle (Albemarle) Predictability Rank

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What is Albemarle Predictability Rank?

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.

Albemarle 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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Albemarle (Albemarle) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Basic Materials » Chemicals » Albemarle Corp (NYSE:ALB) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

ALB:Mexico AMC:Germany AMC:Germany AMC:Germany AMC:Germany A1LB34:Brazil ALBE:Austria

Address

4250 Congress Street, Suite 900, Charlotte, NC, USA, 28209

Website

https://www.albemarle.com

Albemarle is one of the world's largest lithium producers. In the lithium industry, the majority of demand comes from batteries, where lithium is used as the energy storage material, particularly in electric vehicles. Albemarle is a fully integrated lithium producer. Its upstream resources include salt brine deposits in Chile and the U.S. and two hard rock mines in Australia, both of which are joint ventures. The company operates lithium refining plants in Chile, the U.S., Australia, and China. Albemarle is a global leader in the production of bromine, used in flame retardants. It is also a major producer of oil refining catalysts.

Executives

Kristin M Coleman	officer: EVP, General Counsel	140 HAZEL AVE., GLENCOE IL 60022
Neal Ravi Sheorey	officer: Chief Financial Officer	4250 CONGRESS STREET, SUITE 900, CHARLOTTE NC 28209
Michael James Simmons	officer: President - Ketjen	301 COMMERCE STREET, SUITE 3200, FORT WORTH TX 76102
Eric Norris	officer: President, Lithium	1519 AUDUBON ROAD, CHARLOTTE NC 28211
J Kent Masters	director	ALBEMARLE CORP., 451 FLORIDA ST, BATON ROUGE LA 70801
Sean B. O'hollaren	officer: Chief External Affairs Officer	4250 CONGRESS STREET, SUITE 900, CHARLOTTE NC 28209
Jacobus G. Fourie	officer: Chief Capital Projects Officer	4250 CONGRESS STREET, SUITE 900, CHARLOTTE NC 28209
Scott Tozier	officer: EVP & CFO	ALBEMARLE CORP, 4250 CONGRESS ST STE 900, CHARLOTTE NC 28209
Karen G Narwold	officer: EVP, Chief Admin Officer	ALBEMARLE CORPORATION, 4250 CONGRESS ST, SUITE 900, CHARLOTTE NC 28209
Raphael Goszcz Crawford	officer: President, Catalysts	4311 GREENBRIAR HILLS PLANTATION RD, CHARLOTTE NC 28277
Ralf Hans Cramer	director	MIERENDORSFSTRASSE 26, BENSHEIM 2M 64625
Netha N. Johnson	officer: President, Bromine Specialties	3489 CRESTMOOR DRIVE, WOODBURY MN 55125
Barichivich John Clarence Iii	officer: VP, Controller & CAO	4250 CONGRESS ST., SUITE 900, CHARLOTTE NC 28209
Kissam Luther C Iv	director, officer: Chairman, President & CEO	3801 BERESFORD ROAD, CHARLOTTE NC 28211
Melissa H. Anderson	officer: SVP, Chief HR Officer	ALBEMARLE CORPORATION, 4250 CONGRESS ST. SUITE 900, CHARLOTTE NC 28209