Federal National Mortgage Association Fannie Mae (Federal National Mortgage Association Fannie Mae) Predictability Rank

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What is Federal National Mortgage Association Fannie Mae 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.

Federal National Mortgage Association Fannie Mae 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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Federal National Mortgage Association Fannie Mae (Federal National Mortgage Association Fannie Mae) Business Description

Industry

GURUFOCUS.COM » STOCK LIST » Financial Services » Banks » Federal National Mortgage Association Fannie Mae (OTCPK:FNMA) » Definitions » Predictability Rank

Comparable Companies

Traded in Other Exchanges

FNMFN.PFD:USA FNMFM.PFD:USA FNMAT.PFD:USA FNMAS.PFD:USA FNMAP.PFD:USA FNMAO.PFD:USA FNMAN.PFD:USA FNMAM.PFD:USA FNMAL.PFD:USA FNMAK.PFD:USA FNMAJ.PFD:USA FNMAI.PFD:USA FNMAH.PFD:USA FNMAG.PFD:USA FNM:Germany

Address

1100 15th Street, NW, Midtown Center, Washington, DC, USA, 20005

Website

https://www.fanniemae.com

Federal National Mortgage Association Fannie Mae is a source of financing for mortgages in the United States. The company has two segments. The Single-Family business operates in the secondary mortgage market relating to single-family mortgage loans, which are secured by properties containing four or fewer residential dwelling units. The Multifamily business operates in the secondary mortgage market relating mainly to multifamily mortgage loans, which are secured by properties containing five or more residential units. The majority of the revenue is derived from the Single-Family segment.

Executives

Chetlur S Ragavan	director	230 PARK AVENUE, NEW YORK NY 10169
Ramon Richards	officer: EVP & CIO	C/O FANNIE MAE, 1100 15TH STREET, NW, WASHINGTON DC 20005
Michael A. Seelig	director	C/O FANNIE MAE, 1100 15TH STREET, NW, WASHINGTON DC 20005
Priscilla Almodovar	director, officer: CEO	45 WEST 10TH STREET, NEW YORK NY 10011
Anthony Moon	officer: EVP & CRO	C/O FANNIE MAE, 1100 15TH STREET, NW, WASHINGTON DC 20005
Andrew M Brammer	officer: VP & Interim CRO	C/O FANNIE MAE, 110015TH STREET, NW, WASHINGTON DC 20005
James L Holmberg	officer: SVP & Controller	C/O FANNIE MAE, 1100 15TH STREET, NW, WASHINGTON DC 20005
Evans H. Malloy Iii	officer: EVP-Single-family	C/O FANNIE MAE, 1100 15TH STREET NW, WASHINGTON DC 20005
Christopher J Brummer	director	C/O FANNIE MAE, 1100 15TH STREET NW, WASHINGTON DC 20005
Johnson Simon H R	director	C/O FANNIE MAE, 1100 15TH STREET NW, WASHINGTON DC 20005
Michele M Evans	officer: EVP--Multifamily	C/O FANNIE MAE, 1100 15TH STREET NW, WASHINGTON DC 20005
Bair Sheila Colleen	director	6903 ROCKLEDGE DRIVE, SUITE 1500, BETHESDA MD 20817
Stergios Theologides	officer: EVP, GC & Corporate Secretary	CORELOGIC, INC., 40 PACIFICA, SUITE 900, IRVINE CA 92618
Karin Kimbrough	director	C/O FANNIE MAE, 1100 15TH STREET NW, WASHINGTON DC 20005
Stephen H Mcelhennon	officer: interim GC	C/O FANNIE MAE, 1100 15TH STREET, NW, WASHINGTON DC 20005