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
$23.0B
$7.7B
$9.6B
$9.1B
25.8%
33.6%
$34.6B
$3.2B
2017
$22.8B
$2.0B
$10.5B
$3.3B
7.8%
8.7%
$35.3B
$3.8B
2018
$23.7B
$8.4B
$10.6B
$9.6B
67.2%
35.3%
$33.9B
$6.9B
2019
$23.4B
$7.8B
$8.5B
$9.4B
81.1%
33.6%
$29.9B
$6.0B
2020
$25.4B
$7.3B
$9.9B
$10.3B
77.2%
28.6%
$33.0B
$6.3B
2021
$26.0B
$5.9B
$8.4B
$8.4B
88.0%
22.7%
$33.3B
$8.0B
2022
$26.3B
$6.6B
$8.8B
$9.0B
179.0%
24.9%
$38.9B
$7.6B
2023
$28.2B
$6.7B
$7.4B
$9.7B
107.8%
23.8%
$64.6B
$10.9B
2024
$33.4B
$4.1B
$10.4B
$8.6B
69.6%
12.2%
$60.1B
$12.0B
2025
$36.8B
$7.7B
$8.1B
$11.0B
89.1%
21.0%
$54.6B
$9.1B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
AMGEN INC (AMGN) — Investment Memo
🐂 The Bull Case (Warren's voice)
The "Biologic" Moat: Unlike simple pills, biologics are incredibly complex to manufacture. This creates a de facto barrier to entry that extends beyond the patent expiration; "biosimilars" are harder to launch than "generics."
Pricing Power: Amgen sells necessity, not luxury. When a medicine is the only way to prevent systemic failure or death, the payer (insurance/government) has zero leverage on price.
Cash Machine (Potential): If management stops the "elephantitus" and pivots from buying growth to harvesting cash, the operational scale is immense.
Attractive Entry: To be a Berkshire business, we need the debt-load to be a footnote, not the headline. This becomes attractive only when the market prices in a permanent stagnation of the pipeline, allowing us to buy the current cash flows at a steep discount.
🐻 The Bear Case (Charlie inverts)
“Show me where I’ll die and I won’t go there.”
The IRA Guillotine: The Inflation Reduction Act allows Medicare to negotiate prices on top-selling drugs. The "government-granted monopoly" is being revoked in real-time. The pricing power we rely on is a political variable, not a business constant.
The Debt-Spiral Trap: They are using debt ($64.6B) to buy revenue to replace expiring patents. This is a treadmill of desperation. If the cost of capital rises or the acquired assets (like Horizon) underperform, the interest payments will cannibalize the remaining FCF.
R&D Decay: Revenue is up, but FCF is down (-1.2% CAGR). This is the hallmark of a business that has lost its internal engine and is now just an expensive aggregator of other people's science.
Most Likely Failure: A combination of IRA price caps and a "patent cliff" hitting simultaneously over the next 3–5 years, leaving them with massive debt and shrinking margins.
💰 Valuation & Margin of Safety
The DCF is based on a generous 3% terminal growth, but the FCF trend is actually negative. We must be more conservative.
Intrinsic value estimate: $221.21 per share
25% margin of safety entry: $165.91(conservative)
50% margin of safety entry: $110.61(Buffett's ideal)
Current Status: Expensive. Trading significantly above intrinsic value while the underlying quality of earnings is deteriorating.
Verdict: PASS
The business is a melting ice cube masked by a mountain of debt. We are asked to pay a premium for a "moat" that the US government is currently filling in. There is no margin of safety here, only a hope that the next acquisition saves the day.
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.