Berkshire requires a 25–50% discount to intrinsic value before buying.
Buffett Quality Checklist
✗ROE >15% consistently (≥7 of last 10 years)
✓Free cash flow positive (≥8 of last 10 years)
✓Conservative leverage — Debt/Equity below 1
✓Revenue growing at CAGR >5%
✗EPS growing at CAGR >5%
10-Year Financial History — SEC EDGAR 10-K Filings
Year▲
Revenue▲
Net Income▲
FCF▲
Owner Earnings▲
ROE▲
Net Margin▲
LT Debt▲
Cash▲
2016
$20.9B
$1.4B
$2.1B
$1.1B
6.8%
6.7%
$20.7B
$18.6B
2017
$27.4B
$477.0M
$4.4B
$388.0M
1.5%
1.7%
$27.7B
$9.4B
2018
$30.6B
$2.4B
$4.9B
$2.1B
7.8%
7.7%
$19.4B
$3.8B
2019
$31.9B
$3.7B
$4.5B
$3.1B
11.9%
11.6%
$17.9B
$3.9B
2020
$34.6B
$4.5B
$5.7B
$3.5B
13.7%
13.0%
$18.5B
$6.8B
2021
$43.1B
$7.1B
$8.6B
$6.7B
19.8%
16.4%
$18.1B
$9.8B
2022
$43.7B
$6.9B
$7.8B
$6.4B
18.9%
15.9%
$16.8B
$9.9B
2023
$40.1B
$5.7B
$5.1B
$4.8B
14.8%
14.3%
$14.7B
$6.9B
2024
$42.0B
$13.4B
$6.4B
$12.5B
28.1%
31.9%
$14.1B
$7.6B
2025
$44.3B
$6.5B
$7.4B
$5.8B
12.5%
14.7%
$12.9B
$8.5B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
ABBOTT LABORATORIES (ABT) — Investment Memo
🐂 The Bull Case (Warren's voice)
The "Toll Bridge" Model: Abbott doesn't just sell products; they sell essential dependencies. When a patient is locked into the FreeStyle Libre ecosystem or a surgeon is trained on Abbott cardiovascular stents, the switching cost isn't a line item—it's a risk. That is a durable, compounding moat.
Exceptional Recurring Economics: The shift toward continuous glucose monitoring (CGM) transforms a medical device sale into a subscription-like revenue stream. High-frequency, low-friction replenishment is exactly the kind of predictability we crave.
Regulatory Fortress: The FDA acts as a moat-builder. The capital and time required to clear the regulatory hurdle for new diagnostics create a massive barrier to entry for any "disruptor" with a slide deck and a dream.
Attractive Entry: This becomes a "no-brainer" if we can acquire it at a price that ignores the temporary noise and focuses on the long-term cash-generating power of the diagnostics and nutrition wings.
🐻 The Bear Case (Charlie inverts)
The GLP-1 Structural Shift: If weight-loss drugs significantly reduce the prevalence of Type 2 diabetes and associated cardiovascular comorbidities, the entire growth thesis for the diabetes and heart-device segments is permanently impaired. This isn't a dip; it's a shrinking market.
The "Growth Trap" Mirage: Revenue is growing at 8.1%, but EPS is crawling at 2.5%. This is a red flag. It suggests management is buying growth through expensive acquisitions rather than generating it organically. If you have to spend $1.00 in M&A to get $0.10 in earnings growth, you aren't building value—you're treadmill running.
Accounting Alchemy: The $7B gap between Net Income and FCF in 2024 is an eyesore. When "paper profits" diverge wildly from "cash in the bank," the accountants are usually painting a picture that doesn't exist.
Most Likely Failure: The "Growth Trap." Within 3–5 years, the aggressive M&A strategy may lead to massive goodwill impairments as the acquired "growth" fails to hit the bottom line.
💰 Valuation & Margin of Safety
Reacting to the DCF estimate of $150.49:
Intrinsic value estimate: $150.49
25% margin of safety entry: $112.87(conservative)
50% margin of safety entry: $75.25(Buffett's ideal)
Current Status: Fairly valued to slightly undervalued. While the current market price hovers near the 25% MoS mark, the disconnect between revenue growth and EPS growth makes the $150.49 ceiling feel optimistic rather than certain.
Verdict: WATCH
The business is a fortress, but the current financials are a fog. We do not buy when the accounting is "alchemy" and EPS lags revenue growth this severely. We wait for a price closer to $110 or evidence that organic margins are recovering.
Other Analyst Views· Lynch · Damodaran
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.