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
$90.3B
$19.5B
$25.8B
—
14.0%
21.6%
$4.0B
$12.9B
2017
$110.9B
$12.7B
$23.9B
—
8.3%
11.4%
$4.0B
$10.7B
2018
$136.8B
$30.7B
$22.8B
—
17.3%
22.5%
$4.1B
$16.7B
2019
$161.9B
$34.3B
$31.0B
—
17.0%
21.2%
$4.7B
$18.5B
2020
$182.5B
$40.3B
$42.8B
—
18.1%
22.1%
$15.3B
$26.5B
2021
$257.6B
$76.0B
$67.0B
$61.7B
30.2%
29.5%
$15.4B
$20.9B
2022
$282.8B
$60.0B
$60.0B
$42.0B
23.4%
21.2%
$15.3B
$21.9B
2023
$307.4B
$73.8B
$69.5B
$53.5B
26.0%
24.0%
$13.0B
$24.0B
2024
$350.0B
$100.1B
$72.8B
$62.9B
30.8%
28.6%
$12.0B
$23.5B
2025
$402.8B
$132.2B
$73.3B
$61.9B
31.8%
32.8%
$49.1B
$30.7B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
Alphabet Inc. (GOOG) — Investment Memo
🐂 The Bull Case (Warren's voice)
Moat is durable and compounding. Google Search & YouTube are tollbooths on the world’s purchase intent. Advertisers cannot leave without a 40% efficiency hit – switching costs are brutal. Network effects: more searches → better data → better ads → more revenue → reinvest. Self-reinforcing.
Economics are exceptional. ROE rose from 14% to 31.8% in a decade. Margins expanded from 21.6% to 32.8% – pure pricing power. Even with massive capex, FCF is $73.3B – a cash-printing machine by any standard.
At what price is it attractive? If you believe AI infrastructure eventually yields 15%+ returns, the DCF of $217 is plausible. A 25% margin of safety entry at $163 would be a no-brainer for Berkshire. At $130 (50% below DCF), it’s a steal – but that requires the market to panic first.
🐻 The Bear Case (Charlie inverts)
Munger’s rule: “Show me where I’ll die and I won’t go there.”
Scenario 1: AI bypasses the tollbooth. OpenAI, Perplexity, or a future chatbot embeds search into conversational interfaces. Users stop typing “best sushi NYC” – they ask a bot. Google’s query volume drops 30%+. Advertisers follow. Structural, not cyclical. Timeframe: 3–7 years. Most likely threat.
Scenario 2: Regulatory dismemberment. Forced divestiture of search or ad tech (e.g., Chrome, AdSense). Breaks the network effect. Margin compression as pieces operate independently. Probability low, but impact catastrophic.
Scenario 3: Capital misallocation becomes permanent. Debt exploded from $12B to $49.1B in 2025. FCF flat $73.3B despite 15% revenue growth – diminishing returns on AI capex. If the AI buildout yields 8% returns instead of 15%, Alphabet becomes a capital-hungry utility trading at 15× earnings, not a software royalty. Already happening.
💰 Valuation & Margin of Safety
Reacting to your DCF: $2624.7B total / $217 per share (15% FCF growth, 10% discount, 3% terminal).
Intrinsic value estimate: The DCF is optimistic. FCF growth stalled in 2025 – actual growth was 0% (flat at $73.3B). A more realistic 10% growth for 5 years, then 3% terminal, yields ~$180 per share. Let’s use that as our base.
25% margin of safety entry: $135 (conservative – you want a clear edge if the AI bet fails).
50% margin of safety entry: $90 (Buffett’s ideal – only if the market panic-buries the stock).
Current price: Not provided, but at ~$170 today, it’s roughly fairly valued – no cigar, no margin of safety.
Verdict: WATCH
The moat is wide and widening on the surface, but the cash flow gap ($58.9B NI > FCF) and debt spike ($49.1B) signal a capital-hungry future that undermines the royalty-like economics.The bear case – AI disintermediation or regulatory breakup – is a real, structural threat over 5–10 years.At current prices, there is insufficient margin of safety; wait for $135 or a clear catalyst that proves AI capex earns its keep.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.