The Investor Who Challenged Warren Buffett And Got It Right

So, after a little more than two years, let’s find who was right. At the time the aforementioned interview took place, International Business Machines Corp. (NYSE:IBM) was trading at $181.30 per share and was already in an obvious downtrend. The stock ended 2014 down by 13% and 2015 down by roughly 15%; not the performance you’d expect from an iconic stalwart. The stock has sank even lower in early 2016, reaching a low of $116.90 per share, a decline of 35.5% from the time of the interview. Since hitting that low point, the stock has rebounded somewhat, ending yesterday’s trading session at $134.37 per share, which means the stock is currently down by 26% since Druckenmiller issued his verdict.

Let’s also take a look at the fundamentals Druckenmiller was talking about. According to data from Morningstar, IBM’s revenue for 2013 amounted to $99.7 billion, which fell all the way to $81.7 billion in 2015, a decline of 18% over two years. Whereas the company’s free cash flow stood at $13.3 billion at the end of 2013, by the end of 2015 that figure had fallen to $12.8 billion. Again, Druckenmiller was spot on. So, is there light at the end of the tunnel? IBM’s latest quarterly report seems to point to a change of fortune. For the fourth quarter, the company reported earnings of $4.84 per share on the back of $22.06 billion in revenue, while analysts had predicted revenue of $22.02 billion and earnings of $4.81 a share. Most importantly, IBM registered a 43% increase in its revenue from its cloud business, to $10.2 billion in 2015, although the growth rate could have been even greater, reaching 57% if not for currency headwinds and divestitures. Ginni Rometty, IBM’s CEO, said the company’s main goal continues to be a shift from the weakening software business into the growing cloud business.

To this day, Warren Buffett has held to his guns and has steadily increased his investment in IBM. According to Berkshire Hathaway’s latest 13F filing, Buffett’s holding amounts to 81 million shares, up from the 68 million shares reported at the end of the third quarter of 2013.

Head to the final page to see how Mr. Druckenmiller’s bullish bets from that interview ended up turning out.