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. (GOOGL) — Investment Memo
🐂 The Bull Case (Warren's voice)
Moat is a self-reinforcing flywheel. Every search query trains the algorithm; every advertiser bid funds more data; every user stays because it’s the best. Network effects + switching costs = no rival has both.
Economics are exceptional — on the surface.$402.8B revenue, 32.8% net margin, 31.8% ROE. The ad business prints cash with zero marginal cost per impression. Cloud is becoming a second engine (though still investing).
Price range for genuine attractiveness: Below $163/share (25% margin of safety on DCF). That’s a ~25x FCF multiple on $73.3B FCF — fair for a durable compounder. Below $109 (50% margin) would be Buffett’s dream. At current ~$190, it’s not a steal — but not crazy either.
🐻 The Bear Case (Charlie inverts)
Regulatory breakup: DOJ forces divestiture of Chrome or Android search default. The network effect fragments — advertisers lose unified reach, users get a weaker Google. Permanent impairment in 2–5 years if court orders structural remedy.
AI bypass: A perfect chatbot (OpenAI, Meta) becomes the default gateway for queries. Search ad revenue collapses as users stop clicking blue links. Google’s own AI (Gemini) might defend, but the moat is in search behavior, not AI tech.
Leverage + capex spiral:$49.1B debt (up 4×) funding AI infrastructure that may not yield returns. If FCF stays flat (grew only $0.5B in 2025), interest costs become a permanent drag. A recession would expose the brittle balance sheet.
Most likely threat: Regulatory action. Timeframe: 3–7 years. Probability: higher than market prices.
💰 Valuation & Margin of Safety
Intrinsic value estimate (DCF):$217 per share (15% FCF growth, 10% discount, 3% terminal). That’s optimistic — assumes FCF grows from $73B to $300B+ in 10 years.
25% margin of safety entry:$163/share — the price where you sleep well despite the debt jump.
50% margin of safety entry:$109/share — Buffett’s ideal: a great business at a fair price, with room for error.
Current assessment: At ~$190, it’s 12% below intrinsic — cheap, but not deep value. The FCF/NI gap ($59B) and debt surge mean the true intrinsic is lower. I’d say it’s fairly priced to slightly overvalued given the risks.
Verdict: WATCH
At $190 the business is neither absurdly cheap nor dangerously expensive, but the $59B FCF gap and 4× debt increase are non-obvious holes in the story that demand more proof before committing Berkshire capital. The moat is real and widening, but management’s capital allocation (borrowing while sitting on cash) is a yellow flag that only a wider margin of safety would turn green.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.