What is Babcock & Wilcox Enterprises 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.
Babcock & Wilcox Enterprises 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
Babcock & Wilcox Enterprises (Babcock & Wilcox Enterprises) Business Description
Traded in Other Exchanges
Address
1200 East Market Street, Suite 650, Akron, OH, USA, 44305
Babcock & Wilcox Enterprises is a power generation equipment supplier and servicing company that operates in three segments: B&W Renewable, B&W Environmental, and B&W Thermal. B&W Thermal, which focuses on steam generation products and solutions for plants in the power generation, oil and gas, and industrial sectors, generates the majority of the company's revenue. B&W Renewable focuses on sustainable power and heat generation while B&W Environmental focuses on emissions control. The company's customer base spans the industrial, electrical utility, and municipal industries located predominantly in the United States, Canada, Denmark, and the United Kingdom. Business in the U.S. contributes the vast majority of its revenue.
Executives
| Henry E Bartoli |
director, officer: Chief Strategy Officer |
1200 E. MARKET STREET, SUITE 650, AKRON OH 44305 |
| Christopher S Riker |
officer: Senior Vice President |
1200 E. MARKET STREET, SUITE 650, AKRON OH 44305 |
| Louis Jr Salamone |
officer: Chief Financial Officer |
7925 JONES BRANCH DRIVE, MCLEAN VA 22102 |
| Joseph A Tato |
director |
580 INDIAN HARBOR ROAD, VERO BEACH FL 32963 |
| B. Riley Financial, Inc. |
10 percent owner |
11100 SANTA MONICA BLVD, SUITE 800, LOS ANGELES CA 90025 |
| Kenneth M Young |
officer: Chief Executive Officer |
C/O B. RILEY FINANCIAL, INC., 21255 BURBANK BLVD., SUITE 400, WOODLAND HILLS CA 91367 |
| Alan B Howe |
director |
1155 KAS DRIVE SUITE 100, RICHARDSON TX 75081 |
| John J Dziewisz |
officer: SVP & Corp. Secy. |
1200 E. MARKET STREET, SUITE 650, SUITE 650, AKRON OH 44305 |
| Joseph T Buckler |
officer: Senior Vice President |
1200 E. MARKET STREET, SUITE 650, AKRON OH 44305 |
| Jimmy B Morgan |
officer: SVP, Babcock & Wilcox |
1200 E. MARKET STREET, SUITE 650, AKRON OH 44305 |
| Philip D Moeller |
director |
2306 CHAIN BRIDGE ROAD, NW, WASHINGTON DC 20016 |
| Rebecca L Stahl |
director |
2106 SOUTH BAY LANE, RESTON VA 20191 |
| Brf Investments, Llc |
10 percent owner |
11100 SANTA MONICA BLVD., SUITE 800, LOS ANGELES CA 90025 |
| Brc Partners Opportunity Fund, Lp |
10 percent owner |
11100 SANTA MONICA BLVD. SUITE 800, LOS ANGELES CA 90025 |
| Vintage Capital Management Llc |
10 percent owner |
4705 S APOPKA VINELAND ROAD SUITE 210, ORLANDO FL 32819 |
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