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
$6.6B
$1.7B
$1.6B
$1.7B
14.5%
26.1%
$1.4B
$8.5B
2017
$6.4B
$1.7B
$1.1B
$1.7B
13.4%
26.5%
$1.0B
$8.7B
2018
$6.3B
$764.4M
$2.1B
$732.5M
7.7%
12.1%
$695.9M
$6.9B
2019
$5.8B
$1.2B
$34.8M
$1.0B
12.1%
20.7%
$696.9M
$6.2B
2020
$5.6B
$798.9M
$979.6M
$769.7M
7.9%
14.4%
$2.0B
$4.0B
2021
$8.4B
$1.8B
$1.2B
$1.8B
16.3%
21.7%
$3.4B
$4.6B
2022
$8.3B
$1.3B
$1.9B
$1.3B
11.3%
15.6%
$3.4B
—
2023
$7.8B
$882.8M
$940.4M
$838.3M
7.4%
11.2%
$3.1B
—
2024
$8.5B
$464.8M
$794.2M
$404.2M
3.7%
5.5%
$2.8B
—
2025
$8.8B
$524.9M
$911.6M
$495.7M
4.3%
6.0%
$2.4B
—
Warren & Charlie
Buffett / Munger — quality, moat & valuation
FRANKLIN RESOURCES INC (BEN) — Investment Memo
🐂 The Bull Case (Warren's voice)
To be fair, we must look for the seed of a wonderful business, even in a drought.
The Cash Machine: Despite the decay, the business still generates $0.9B in Free Cash Flow. It is a legacy giant that can pay dividends while it figures out its next act.
Scale as a Shield: Managing trillions isn't easy. The infrastructure, regulatory licenses, and global distribution networks are expensive to replicate, providing a floor to the business's survival.
The Pivot Play: If management can successfully shift AUM from low-margin active mutual funds into high-fee alternative investments or private markets, the margin collapse could reverse.
Attractiveness Range: This is no longer a "compounder" but a "deep value" play. It becomes attractive only if the market prices it as a liquidating trust rather than a growth company.
Entry Point: Genuinely attractive only if it trades at a significant discount to its tangible book value and current FCF yield exceeds 12%.
🐻 The Bear Case (Charlie inverts)
"Show me where I'll die and I won't go there."
The Passive Vacuum: The structural shift from active management to zero-fee ETFs is not a "cycle"—it is an extinction event. Franklin is fighting a war where the enemy has an infinite ammunition supply (Vanguard/BlackRock) and prices their product at zero.
The Margin Death Spiral: A net margin collapse from 26.1% to 6.0% is a bloodbath. When you lose pricing power, you aren't a business; you're a commodity.
Capital Mismanagement: Reinvesting capital to see Revenue grow 1.0% while Net Income drops -12.7% is the definition of diworseification. They are spending money to shrink their profits.
The Terminal Scenario: The "Slow Bleed." AUM stays flat or grows slightly, but fee compression continues until the cost of regulatory compliance exceeds the remaining profit.
Probability: High. The structural threat is already visible in the ROE decay (14.5% → 4.3%). This isn't a risk; it's the current reality.
💰 Valuation & Margin of Safety
The DCF assumes a 3% growth rate, which may be overly optimistic given the NI CAGR of -12.7%.
Intrinsic value estimate: $25.75 per share
25% margin of safety entry: $19.31(Conservative)
50% margin of safety entry: $12.88(Buffett's ideal)
Current Status: If trading above $25.75, it is expensive. If trading near $20, it is a "cigar butt" with a dwindling ember.
Verdict: PASS
The business is a sinking ship with a leaking hull. While the price may eventually look "cheap," there is no durable moat to protect the remaining capital. We do not buy dying businesses just because the ticket price is low.
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.