- The legendary investor Warren Buffett avoids making predictions, but we’ve gathered 12 of his best guesses about cryptocurrency, table tennis, and even his own death.
- We’ve detailed each prediction and assessed its accuracy in the slideshow below.
The legendary investor Warren Buffett knows better than to make predictions.
“We have no idea – and never have had – whether the market is going to go up, down, or sideways in the near- or intermediate-term future,” he wrote in his 1986 letter to Berkshire Hathaway shareholders.
Yet the Sage of Omaha couldn’t resist making a few guesses about the future over the years. We’ve gathered 12 of his most intriguing predictions and assessed their accuracy in the slideshow below.
“In terms of cryptocurrencies…I can say with almost certainty that they will come to a bad ending,” Buffett said in an interview wih CNBC in January 2018. “When it happens or how or anything else, I don’t know.”
He added: “If I could buy a five-year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.”
Buffett has been right about cryptocurrencies so far. At the time of his prediction, bitcoin traded above $14,000. The cryptocurrency slumped below $4,000 by the end of 2018, and it currently trades around $5,200.
3. Berkshire Hathaway
“It is fitting that the visit of Halley’s Comet coincided with this percentage gain: neither will be seen again in my lifetime,” Buffett told Berkshire Hathaway shareholders after the conglomerate grew its net worth by 48.2% in 1985.
He also predicted the 23.2% compounded annual growth in the company’s book value per share that year was “another percentage that will not be repeated.”
It took nearly 20 years for Buffett to prove himself wrong on the first count. Berkshire Hathaway’s net worth jumped 48.3% in 1998, although that was largely because the company issued shares for acquisitions. “Normally, a gain of 48.3% would call for handsprings – but not this year,” he told investors.
Buffett’s second prediction was way off the mark. Berkshire Hathaway’s book value per share rose by 23.3% in the next year, 1986. It has also grown by at least 23.2% in more than 10 other years since 1985.
Buffett told students at the University of Kansas in May 2005 that Sears Chairman Eddie Lampert would struggle to revitalize the department-store chain. He warned that rivals such as Walmart and Costco could undercut Sears, which was acquired by rival Kmart in 2005.
“Eddie is a very smart guy, but putting Kmart and Sears together is a tough hand,” Buffett said. “Turning around a retailer that has been slipping for a long time would be very difficult.”
Buffett was right on the money – Sears filed for bankruptcy in October 2018. However, some hope remains: Lampert recently won court approval to buy the 126-year-old retailer out of bankruptcy and escape liquidation.
5. ABC, Geico, and The Washington Post
GEICO / Facebook
“We expect to keep permanently our three primary holdings, Capital Cities/ABC, Inc., Geico Corporation, and The Washington Post,” Buffett told Berkshire Hathaway shareholders in his 1986 letter.
“Even if these securities were to appear significantly overpriced, we would not anticipate selling them, just as we would not sell See’s [Candies] or Buffalo Evening News if someone were to offer us a price far above what we believe those businesses are worth,” he added.
Despite his best intentions, Buffett can’t resist a great deal. Berkshire Hathaway sold its stake in Capital Cities/ABC to The Walt Disney Company in 1996 in a cash-and-stock deal worth $2.5 billion.
The Sage of Omaha also flogged his company’s 28% stake in The Washington Post to Graham Holdings in a deal worth more than $1.1 billion in 2014, according to The Washington Post. The Graham family sold The Post to Amazon CEO Jeff Bezos in a $250 million deal in 2013.
Berkshire Hathaway remains a major investor in Geico, See’s Candies, and Buffalo Evening News.
6. Freddie Mac
“In 1988 we made major purchases of Federal Home Loan Mortgage Pfd. (‘Freddie Mac’),” Buffett told Berkshire Hathaway shareholders in his letter that year.
“We expect to hold these securities for a long time. In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.”
Luckily for Buffett, he changed his mind. Berkshire Hathaway sold nearly all of its Freddie Mac and Fannie Mae shares in 2000, slashing its holding from 8.6% in 1999 to just 0.3%. Buffett told the Financial Crisis Inquiry Commission in 2010 that he had grown “concerned” about the companies’ management.
“They were trying to — and proclaiming that they could increase earnings per share in some low double-digit range or something of the sort,” he said. “And any time a large financial institution starts promising regular earnings increases, you’re going to have trouble, you know?”
7. Coca-Cola and Gillette
“No sensible observer – not even these companies’ most vigorous competitors, assuming they are assessing the matter honestly – questions that Coke and Gillette will dominate their fields worldwide for an investment lifetime,” Buffett wrote in his 1996 letter to Berkshire Hathaway shareholders.
“Indeed, their dominance will probably strengthen. Both companies have significantly expanded their already huge shares of market during the past ten years, and all signs point to their repeating that performance in the next decade.”
Buffett’s claims have proven sound so far: Both Coke and Gillette remain the biggest players in their markets, although the latter is under mounting pressure.
Coca-Cola’s share of the US soft-drinks market was 41% in 1991, compared to Pepsi’s 33%, according to the New York Times, and it outsold its archrival by four-to-one in overseas markets. Its share of the global carbonated-beverage market was nearly 49% in 2015, according to Statista.
In contrast, Gillette’s market share has fallen from 70% in 2010 to 54% in 2016 in the face of fierce competition from start-ups including the Unilever-owned Dollar Shave Club and Harry’s, according to a report from the data-tracking firm Euromonitor, cited by the Wall Street Journal.
“My expected lifespan of about 12 years (though, naturally, I’m aiming for more),” Buffett wrote in his 2006 letter to shareholders.
If Buffett had to pick one forecast to undershoot, he would probably choose this one. Just over 12 years after writing the letter, he’s still alive and seems to be in good health.
“Housing will come back – you can be sure of that,” Buffett told shareholders in his 2011 letter after the US housing bubble burst, fueling the financial crisis.
He added: “We will again build one million or more residential units annually. I believe pundits will be surprised at how far unemployment drops once that happens.”
Buffett was right about a housing and employment recovery. Housing starts in the US were tracking at a seasonally adjusted annual rate of about 1.2 million units in February, according to the US Census Bureau.
Unemployment has also fallen from 8.9% in 2011 to below 3.8% in 2018, according to the Bureau of Labor Statistics, an 18-year low.
11. Index funds
“Over a ten-year period commencing on January 1, 2008, and ending on December 31, 2017, the S&P 500 will outperform a portfolio of funds of hedge funds – more than 200 of them – when performance is measured on a basis net of fees, costs and expenses,” Buffett predicted.
He posted the above prediction on Long Bets, a website for making long-term wagers and nominating charities to receive the winnings. Ted Seides, co-manager of Protégé Partners – an asset manager that invests in multiple hedge funds – agreed to bet that a portfolio of five funds, invested in more than 200 hedge funds, would beat the S&P 500 index.
Buffett has argued for years that index funds offer better returns to investors than stock-pickers, as they provide exposure to a broad range of stocks and charge fewer fees.
The Sage of Omaha won the bet. The S&P 500 returned an average of 8.5% between 2008 and 2017, while the average return of the five funds it was up against was less than 3%.
Buffett donated his $2.2 million payout to Girls Incorporated of Omaha.
12. S&P 500
Buffett is notoriously skeptical that the good times will continue. In Berkshire Hathaway’s 1999 letter to shareholders, Buffett and his partner Charlie Munger deemed it a “virtual certainty” that the S&P 500 would “do far less well in the next decade or two than it has done since 1982.”
Buffett was right that the S&P’s stellar average total return of just over 19% between 1982 and 1999 wouldn’t last. The index returned an average of 1.2% over the next decade, according to SlickCharts, recovering to a respectable 12.2% between 2010 and 2018.