Delta Air Lines (Delta Air Lines) Predictability Rank

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What is Delta Air Lines 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.

Delta Air Lines 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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Delta Air Lines (Delta Air Lines) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Industrials » Transportation » Delta Air Lines Inc (NYSE:DAL) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

DAL:Peru DAL:Mexico OYC:Germany OYC:Germany DEAI34:Brazil DAL:Austria

Address

Post Office Box 20706, Atlanta, GA, USA, 30320-6001

Website

https://www.delta.com

Atlanta-based Delta Air Lines is one of the world's largest airlines, with a network of over 300 destinations in more than 50 countries. Delta operates a hub-and-spoke network, where it gathers and distributes passengers across the globe through its biggest hubs in Atlanta, New York, Salt Lake City, Detroit, Seattle, and Minneapolis-St. Paul.

Executives

David S Taylor	director	THE PROCTER & GAMBLE COMPANY, ONE PROCTER & GAMBLE PLAZA, CINCINNATI OH 45202
Joanne D Smith	officer: EVP & Chief HR Officer	C/O DELTA AIR LINES, INC., P.O. BOX 20574, DEPT. 981, ATLANTA GA 30320
Steven M Sear	officer: Pres. Int'l & EVP Global Sales	C/O DELTA AIR LINES, INC., P.O. BOX 20574, DEPT. 981, ATLANTA GA 30320
Peter W Carter	officer: EVP and Chief Legal Officer	C/O DELTA AIR LINES, INC., P.O. BOX 20574, DEPT. 981, ATLANTA GA 30320
Michael P Huerta	director	1800 M STREET NW SUITE 800, WASHINGTON DC 20036
Mike Spanos	officer: EVP & Chief Operating Officer	PEPSICO, INC., 700 ANDERSON HILL ROAD, PURCHASE NY 10577
Vasant M Prabhu	director	C/O SAFEWAY INC, 5918 STONERIDGE MALL ROAD, PLEASANTON CA 94588
Glen W Hauenstein	officer: EVP-Network Plng & Rev Mgmt	1600 SMITH ST, HOUSTON TX 77002
William C Carroll	officer: SVP, Finance & Controller	C/O DELTA AIR LINES, INC., P.O. BOX 20574, DEPT. 981, ATLANTA GA 30320
Francis S Blake	director	2455 PACES FERRY RD, ATLANTA GA 30339
Edward H Bastian	officer: President and CEO NWA	C/O DELTA AIR LINES, INC., DEPT. 981, P.O. BOX 20574, ATLANTA GA 30320
Greg Creed	director	1441 GARDINER LANE, LOUISVILLE KY 40213
Leslie D. Hale	director	3 BETHESDA METRO CENTER, SUITE 1000, BETHESDA MD 20814
John E Laughter	officer: EVP - Chief of Operations	P.O. BOX 20574, C/O DELTA AIR LINES, INC. DEPT. 981, ATLANTA GA 30320
Daniel C. Janki	officer: EVP & Chief Financial Officer	5020 WESTON PARKWAY, SUITE 400, CARY NC 27513