Canadian Pacific Kansas City (Canadian Pacific Kansas City) Predictability Rank

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What is Canadian Pacific Kansas City 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.

Canadian Pacific Kansas City 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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Canadian Pacific Kansas City (Canadian Pacific Kansas City) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Transportation » Canadian Pacific Kansas City Ltd (NYSE:CP) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

X88:Germany CP:Canada CPRL34:Brazil

Address

7550 Ogden Dale Road S.E., Calgary, AB, CAN, T2C 4X9

Website

https://www.cpr.ca

Canadian Pacific Kansas City is a Class-1 railroad operating on track that spans across most of Canada and into parts of the Midwestern and Northeastern United States. Following the April 2023 Kansas City Southern merger, CP operates new single-line-haul services from Canada and the Upper Midwest down through Texas, the Gulf of Mexico, and into Mexico. It also hauls cross border and intra Mexico freight via operating concessions on 3,300 miles of rail in Mexico. CP hauls shipments of grain, intermodal containers, energy products (like crude and frac sand), chemicals, plastics, coal, fertilizer and potash, automotive products, and a diverse mix of other merchandise.

Executives

John Kenneth Brooks	officer: SVP & Chief Marketing Officer	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
Mike Foran	officer: VP Network Transportation	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
Clements James Dominic Luther	officer: VP Planning & Transportation	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
Mark Kenneth Wallace	officer: VP Corp Affrs & Chief of Staff	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
E Hunter Harrison	director, officer: Chief Executive Officer	2708 SHELTINGHAM, WELLINGTON FL 33414
Trafton Gordon T. Ii	director	2632 SUTTON CIRCLE, NAPERVILLE IL 60564
Ubavka Rebecca Macdonald	director	130 KING STREET WEST, TORONTO A6 M5X 1E1
Jane L Peverett	director	1489 MARINE DRIVE, SUITE 802, WEST VANCOUVER A1 V7T 1B8
Peter John Edwards	officer: VP HR & Labour Relations	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
Robert Allen Johnson	officer: Executive VP Operations	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
John E Derry	officer: Vice-President Human Resources	7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
William R. Fatt	director	129 ROCHESTER AVENUE, TORONTO A6 M4N 1N9
Gillian H Denham	director	C/O CANADIAN PACIFIC RAILWAY LIMITED, 7550 OGDEN DALE ROAD S.E., CALGARY A0 T2C 4X9
Nadeem Velani	officer: Interim VP and CFO	7550 OGDEN DALE ROAD S. E., CALGARY A0 T2C 4X9
Pershing Square Capital Management, L.p.	director	787 11TH AVENUE, 9TH FLOOR, NEW YORK NY 10019