What is FS KKR Capital 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.
FS KKR Capital 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
FS KKR Capital (FS KKR Capital) Business Description
Traded in Other Exchanges
Address
201 Rouse Boulevard, Philadelphia, PA, USA, 19112
FS KKR Capital Corp is a business development company based in the United States. Its portfolio is comprised of investments in senior secured loans and second lien secured loans of private middle market U.S. companies and, to a lesser extent, subordinated loans and certain asset-based financing loans of private U.S. companies. It is focused on providing customized credit solutions to private upper middle-market companies, which it generally defines as companies with annual EBITDA of at least $50 million at the time of investment.
Executives
| Jerel A Hopkins |
director |
C/O FS INVESTMENT CORPORATION II, CIRA CENTRE, 2929 ARCH STREET, SUITE 675, PHILADELPHIA PA 19104 |
| Elizabeth Sandler |
director |
201 ROUSE BLVD, PHILADELPHIA PA 19112 |
| Brian Gerson |
officer: President, other: Investment Committee Member |
C/O SOLAR CAPITAL LTD., 500 PARK AVENUE, NEW YORK NY 10022 |
| Daniel Pietrzak |
officer: Chief Investment Officer |
9 WEST 57TH STREET, SUITE 4200, NEW YORK NY 10019 |
| Barbara Adams |
director |
112 NORTH WOOSTOCK STREET, PHILADELPHIA PA 19103 |
| Richard I Goldstein |
director |
C/O INTELLON CORPORATION, 5955 T.G. LEE BLVD., SUITE 600, ORLANDO FL 32822 |
| Michael C. Forman |
director, officer: President and CEO |
CIRA CENTRE, 2929 ARCH STREET, SUITE 675, PHILADELPHIA PA 19104-2867 |
| James H Kropp |
director |
701 WESTERN AVENUE, GLENDALE CA 91201 |
| Brian R. Ford |
director |
1 MILFORD WAY, MEDFORD NJ 08055 |
| Todd C. Builione |
director, officer: President |
C/O KKR CREDIT ADVISORS (US) LLC, 9 WEST 57TH STREET, NEW YORK NY 10019 |
| William Balke Goebel |
officer: Chief Financial Officer |
C/O FS INVESTMENT CORP., CIRA CENTRE, 2929 ARCH STREET, SUITE 675, PHILADELPHIA PA 19104-2867 |
| Stephen Sypherd |
officer: VP, Treasurer & Secretary |
C/O FRANKLIN SQUARE CAPITAL PARTNERS, CIRA CENTRE, 2929 ARCH STREET, SUITE 675, PHILADELPHIA PA 19104 |
| Osagie O Imasogie |
director |
|
| Steven C Lilly |
officer: Chief Financial Officer |
1004 FARNAM STREET, SUITE 400, OMAHA NE 27511 |
| Michael J Hagan |
director |
555 EAST LANCASTER AVENUE, SUITE 640, RADNOR PA 19087 |
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