ClaimsWarren Buffett

“I would wager you a very significant sum that fewer than 10 of the 200 most profitable companies in 2000 will attain 15% annual growth in earnings-per-share over the next 20 years.”

Warren Buffett, Berkshire chairman 28 February 2001 Chairman's Letter (2000) (Berkshire Hathaway) archived copy

Prediction Economics and markets

Fewer than 10 of the 200 most profitable companies in 2000 will attain 15% annual earnings-per-share growth over the next 20 years.

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

Prediction judged at 2020 (20 years from 2000). True: an analysis of the 200 most profitable US companies of 2000 (e.g. Fortune 500 ranked by profit) shows fewer than 10 achieved compound EPS growth of 15% or more a year from 2000 to 2020. Mostly true: a reasonable analysis gives about 10 using a slightly different list or endpoints, with most methods giving under 10. Mixed: credible analyses disagree, some under 10 and some at 10 or more. Mostly false: the count is 10 to about 15. False: clearly more than about 15 companies hit 15% annual EPS growth.

Set before the research began.

Evidence (8)

  1. E1 Law Of Diminishing Returns: Warren Buffett's Advised Experiment 24sevenfinance (WordPress blog) · 2 December 2013

    “Looks like Buffett’s bet would have paid off with only 7 companies from the 1990 Fortune 500 growing both revenue at 13%+ and net income at 15%+.”

  2. E2 Law Of Diminishing Returns: Warren Buffett's Advised Experiment 24sevenfinance (WordPress blog) · 2 December 2013

    “I used net income as a proxy for E.P.S.”

  3. E3 The 15 Percent Delusion by Carol Loomis Scribd (repost of a Fortune article by Carol Loomis)

    “Only a handful of the companies managed a rate of 15% or better, and many flunked at growth entirely.”

  4. E4 The 15 Percent Delusion by Carol Loomis Scribd (repost of a Fortune article by Carol Loomis)

    “The fact that we threw out any company that did not last the period (because it was acquired, perhaps, or subjected to a leveraged buyout) gives the results an upward, "survivorship" bias.”

  5. E5 The 15 Percent Delusion by Carol Loomis Scribd (repost of a Fortune article by Carol Loomis)

    “Only a handful of the companies managed a rate of 15% or better, and many flunked at growth entirely.”

  6. E6 The 15 Percent Delusion by Carol Loomis Scribd (repost of a Fortune article by Carol Loomis)

    “For three different periods--1960-80, 1970-90, and 1980-99--we examined earnings-per-share growth for 150 large companies.”

  7. E7 The 15 Percent Delusion by Carol Loomis Scribd (repost of a Fortune article by Carol Loomis)

    “The fact that we threw out any company that did not last the period (because it was acquired, perhaps, or subjected to a leveraged buyout) gives the results an upward, "survivorship" bias.”

  8. E8 The 15 Percent Delusion by Carol Loomis Scribd (repost of a Fortune article by Carol Loomis)

    “And only three companies out of the 50 beat 15%. They were Philip Morris, at 17.9%; McDonald's, at 17.5%; and Merck, at 15.1%.”

Reasoning

None of the evidence looks at whether the 200 most profitable companies of 2000 grew earnings per share by 15% a year from 2000 to 2020. E1 and E2 describe a blog test of the 1990 Fortune 500 that used net income in place of EPS. E3–E8 come from Carol Loomis's Fortune article on earlier periods (1960-80, 1970-90 and 1980-99). These results fit the reasoning behind the prediction, but they don't count the companies or period the criteria require, so the claim can't be settled.

Cite this claim

Warren Buffett, “Fewer than 10 of the 200 most profitable companies in 2000 will attain 15% annual earnings-per-share growth over the next 20 years.” (said 28 February 2001). Verdict: unresolvable. Reliability API, claim c_8d9bc3942cfb, method 0.1.0+28da144b, dataset release v1.1.2. https://epistacklabs.com/claims/c_8d9bc3942cfb

This claim is in dataset release v1.1.2, with the same verdict.

Reply to this claim

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More prediction claims by Warren Buffett

  1. Mostly true Prediction 27 February 2017
    “And I think they will end up going for something not as dramatic as they might even like to do because they simply don't want to spend the time and the political capital getting it done.”

    Buffett said he thinks those in control will end up going for a less dramatic tax change than they might like, because they don't want to spend the time and political capital getting it done.

  2. Resolved true Prediction 23 September 2010
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  3. Resolved true Prediction 23 September 2010
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  4. Mostly true Prediction 2007
    “Nevertheless, this operation faces unrelenting pressures that will cause profit margins to slide.”

    Unrelenting pressures will cause the Buffalo News's profit margins to slide.

  5. Resolved true Prediction 2007
    “A decade from now, HomeServices will almost certainly be much larger.”

    HomeServices will almost certainly be much larger a decade from 2007.

All of them

Verdicts are made automatically; how verdicts are made.