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
$2.8B
$330.8M
$750.9M
$365.8M
15.4%
11.7%
$3.3B
$548.4M
2017
$3.1B
$755.5M
-$49.5M
$787.3M
27.1%
24.7%
$3.3B
$540.6M
2018
$3.2B
-$111.3M
$674.5M
-$68.1M
-4.6%
-3.5%
$3.3B
$666.7M
2019
$3.4B
-$203.6M
$592.5M
-$168.1M
-9.6%
-6.0%
$3.1B
$601.8M
2020
$3.8B
$1.1B
$798.3M
$1.1B
41.2%
29.5%
$3.0B
$701.0M
2021
$5.6B
$1.9B
$2.2B
$1.8B
44.4%
33.2%
$3.0B
$1.2B
2022
$4.9B
$1.3B
$2.1B
$1.3B
26.7%
26.8%
$2.8B
$2.3B
2023
$4.0B
$456.0M
$959.4M
$453.8M
9.1%
11.3%
$2.8B
$2.7B
2024
$4.0B
$789.5M
$1.2B
$816.4M
15.4%
19.6%
$2.5B
$2.2B
2025
$4.1B
$565.7M
$998.3M
$615.8M
11.2%
13.8%
$2.5B
$2.0B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
HOLOGIC INC (HOLX) — Investment Memo
🐂 The Bull Case (Warren's voice)
Why the moat holds: Switching costs are genuine. Hospitals don’t scrap a $1M mammography system or requalify molecular assays on a whim. Proprietary consumables (HPV, STI tests) lock in recurring revenue. FDA clearance adds a legal fence.
Economics worth owning: ~55% of revenue from disposables and service contracts — high-margin, recurring, and inflation-protected. Diagnostics gross margins are the best in the business. Capital equipment is a loss leader for the ink.
Price that excites Berkshire: Only at a deep discount. If the market panics and offers $50/share (25% below DCF), the razor-blade model delivers a decent real return. At $34/share (50% below), it becomes a genuine bargain — but that requires a crisis no one sees coming.
🐻 The Bear Case (Charlie inverts)
Scenario 1 – Open-platform disruption: Roche, Abbott, or Siemens launches an open molecular system that runs third-party assays. Hologic’s proprietary installed base becomes a stranded asset. Hospitals switch when consumable savings outweigh retraining cost. Most likely within 5–10 years.
Scenario 2 – Debt + stagnant core: $2.5B debt vs. net income of $0.6B. Revenue flat for three years. Management has overpaid for acquisitions (impairments: $42.6M Mobidiag, $9.6M Acessa). One segment stumble (e.g., breast capital sales) squeezes interest coverage. Permanent capital destruction.
Scenario 3 – Accounting reversion: The 2017 phantom profit (NI $0.8B, FCF $0.0B) was a one-time red flag. If working capital games return, earnings quality collapses. Low probability, but lethal when it hits.
💰 Valuation & Margin of Safety
DCF intrinsic value: $67/share (3.2% FCF growth, 10% discount rate, 3% terminal). Assumes moat holds — we doubt it.
25% margin of safety: $50/share — conservative entry for a slowing razor-blade.
50% margin of safety: $34/share — Buffett’s ideal for a mediocre business with decent economics.
Current status: At ~$75/share, it trades ~12% above intrinsic value. Expensive for a business with a narrowing moat, flat growth, and a management team that destroys value through acquisitions.
Verdict: PASS
Hologic’s switching-cost moat is real but narrowing, and management’s capital allocation — overpaying for acquisitions and buying back stock at peak earnings — has been a net destroyer of value. At current prices, there is no margin of safety against the structural threat of open-platform disruption or a debt-fueled stumble. We will wait for a better price or a clearer path to durable compounding — preferably both.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.