What is James River Group Holdings Predictability Rank?
1 (5)
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.
James River Group Holdings 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
James River Group Holdings (James River Group Holdings) Business Description
Traded in Other Exchanges
N/A
Address
90 Pitts Bay Road, Wellesley House, 2nd Floor, Pembroke, BMU, HM08
James River Group Holdings Ltd owns and operates a group of specialty insurance and reinsurance companies. It reports business into four segments. The Excess and Surplus Lines segment, which is the key revenue driver, offers commercial excess and surplus lines liability and excess property insurance products; the Specialty Admitted Insurance segment offers workers' compensation insurance coverage as well as specialty admitted fronting and program business; the Casualty Reinsurance segment offers commercial liability and non-catastrophe property reinsurance to US insurance companies and to the company's US-based insurance subsidiaries; and Corporate and Other segments.
Executives
| Dennis J. Langwell |
director |
C/O LIBERTY MUTUAL GROUP, 175 BERKELEY STREET, BOSTON MA 02116 |
| Matthew Botein |
director |
141 FRONT STREET, HAMILTON D0 HM19 |
| Gallatin Point Capital Llc |
director |
660 STEAMBOAT ROAD, GREENWICH CT 06830 |
| Gpc Partners Investments (thames) Lp |
director |
660 STEAMBOAT ROAD, GREENWICH CT 06830 |
| Lewis A Sachs |
director |
660 STEAMBOAT ROAD, GREENWICH CT 06830 |
| Gpc Partners Ii Gp Llc |
director |
660 STEAMBOAT ROAD, GREENWICH CT 06830 |
| Thomas Lynn Brown |
director |
8750 W. BRYN MAWR, SUITE 1300, CHICAGO IL 60631 |
| Gould Kirstin Romann |
director |
C/O JAMES RIVER GROUP HOLDINGS, LTD., WELLESLEY HOUSE, 90 PITTS BAY ROAD, PEMBROKE D0 HM 08 |
| Peter B. Migliorato |
director |
3401 NORTH OCEAN, NORTH 301, PALM BEACH FL 33480 |
| Patricia H Roberts |
director |
C/O THE NAVIGATORS GROUP, INC., 400 ATLANTIC STREET, 8TH FLOOR, STAMFORD CT 06901 |
| Sherman Ollie L. Jr. |
director |
C/O JAMES RIVER GROUP HOLDINGS,LTD., WELLESLEY HOUSE, 90 PITTS BAY ROAD, PEMBROKE D0 HM 08 |
| Janet Raye Cowell |
director |
C/O COOLEY LLP, 11951 FREEDOM DRIVE, SUITE 1600, RESTON VA 20190 |
| Sundar Srinivasan |
director |
C/O JAMES RIVER GROUP HOLDINGS, LTD., 90 PITTS BAY ROAD, PEMBROKE D0 D0 HM 08 |
| Sarah C. Doran |
officer: Chief Financial Officer |
C/O JAMES RIVER GROUP HOLDINGS, LTD., WELLESLEY HOUSE, 90 PITTS BAY ROAD, PEMBROKE D0 HM 08 |
| Richard Schmitzer |
officer: Pres. & CEO - E&S Lines Sgmt |
C/O JAMES RIVER GROUP HOLDINGS, LTD., 90 PITTS BAY ROAD, PEMBROKE D0 D0 HM 08 |
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