Grantham's bet was that over the next few quarters from 2020, earnings and profit margins would be crushed.
Unresolvable The public record could not settle it.
Prediction: Statements about events outside the person's control, checked once they fell due: did they come true?
Said for an organisation they lead or work for; it counts on both records.
What would count as true or false
This is judged over the few quarters after the 2020 statement, roughly through Q1 2021. The test is aggregate US large-cap earnings and profit margins (S&P 500 reported/operating EPS and net profit margin). 'Crushed' means a severe fall: EPS down roughly 20% or more year over year, and margins clearly below pre-2020 levels. True: both earnings and margins fell severely for several (two or more) consecutive quarters after the statement. Mostly true: a severe fall in both lasted about two quarters, or one measure was severe and the other was clearly depressed. Mixed: the severe fall lasted only one quarter before a quick recovery, or only one of earnings or margins was crushed. Mostly false: there were only modest declines (e.g. under 10% year over year). False: earnings and margins held steady or rose over the following quarters.
Set before the research began.
Evidence (11)
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E1 Key Metrics FactSet Research Systems Inc. (Earnings Insight, John Butters) · 31 July 2020
“Earnings Growth: For Q2 2020, the blended earnings decline for the S&P 500 is -35.7%.”
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E2 Key Metrics FactSet Research Systems Inc. (Earnings Insight, John Butters) · 31 July 2020
“Looking ahead, analysts predict a (year-over-year) decline in earnings in the third quarter (-22.9%) and the fourth quarter (-12.1%) of 2020. However, they also project a return to earnings growth in Q1 2021 (13.4%).”
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E3 Key Metrics FactSet Research Systems Inc. (Earnings Insight, John Butters) · 31 July 2020
“For Q1 2021, analysts are projecting earnings growth of 13.4% and revenue growth of 3.2%.”
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E4 Earnings Insight (July 31, 2020) FactSet Research Systems Inc. (John Butters, Senior Earnings Analyst) · 31 July 2020
“For Q2 2020, the blended earnings decline for the S&P 500 is -35.7%. If -35.7% is the actual decline for the quarter, it will mark the largest year-over-year decline in earnings reported by the index since Q4 2008 (-69.1%).”
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E5 Earnings Insight (July 31, 2020) FactSet Research Systems Inc. (John Butters, Senior Earnings Analyst) · 31 July 2020
“For Q3 2020, analysts are projecting an earnings decline of -22.9% and a revenue decline of -4.5%.”
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E6 Earnings Insight (July 31, 2020) FactSet Research Systems Inc. (John Butters, Senior Earnings Analyst) · 31 July 2020
“For Q1 2021, analysts are projecting earnings growth of 13.4% and revenue growth of 3.2%.”
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E7 Earnings Insight (July 31, 2020) FactSet Research Systems Inc. (John Butters, Senior Earnings Analyst) · 31 July 2020
“For Q4 2020, analysts are projecting an earnings decline of -12.1% and a revenue decline of -1.3%.”
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E8 Key Metrics FactSet Research Systems Inc. (John Butters, Earnings Insight) · 17 April 2020
“For Q1 2020, the blended earnings decline for the S&P 500 is -14.5%.”
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E9 Key Metrics FactSet Research Systems Inc. (John Butters, Earnings Insight) · 17 April 2020
“Looking at future quarters, analysts predict a (year-over-year) decline in earnings in the second quarter (-26.6%), third quarter (-13.3%), and fourth quarter (-4.8%) of 2020.”
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E10 Key Metrics FactSet Research Systems Inc. (John Butters, Earnings Insight) · 17 April 2020
“If 9.4% is the actual net profit margin for the quarter, it will mark the lowest net profit margin reported by the index since Q1 2016 (also 9.4%).”
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E11 Key Metrics FactSet Research Systems Inc. (John Butters, Earnings Insight) · 17 April 2020
“However, analysts are not projecting year-over-year improvement in net profit margins until Q1 2021.”
Reasoning
FactSet's figures show the S&P 500's blended earnings fell 14.5% year over year in Q1 2020 (E8) and 35.7% in Q2 2020 (E1, E4). Both are blended figures from partway through earnings season, not final results. The only figures for Q3 2020, Q4 2020 and Q1 2021 are analysts' forecasts made in April and July 2020 (E2, E5, E7, E9), not reported results. On margins, the evidence gives only a projected 9.4% net profit margin for Q1 2020 and a forecast that margins would not improve until Q1 2021 (E10, E11), with no reported margins for later quarters. The evidence therefore cannot show whether earnings and margins fell severely for two or more quarters, or how quickly they recovered.
Cite this claim
Jeremy Grantham, “Grantham's bet was that over the next few quarters from 2020, earnings and profit margins would be crushed.” (said 2020). Verdict: unresolvable. Reliability API, claim c_7b8a421821de, method 0.1.0+28da144b, dataset release v1.1.2. https://epistacklabs.com/claims/c_7b8a421821de
This claim is in dataset release v1.1.2, with the same verdict.
Reply to this claim
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Resolved false
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