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
$816.1M
$266.6M
$1.1B
$278.1M
—
32.7%
$3.4B
$2.1B
2017
$975.2M
$1.0B
$664.0M
$1.1B
—
102.6%
$5.4B
$1.1B
2018
$4.4B
$1.3B
$1.4B
$1.4B
285.4%
29.5%
$5.7B
$1.7B
2019
$4.8B
$1.4B
$1.6B
$1.6B
232.4%
29.4%
$5.6B
$1.8B
2020
$5.4B
$1.8B
$2.0B
$1.9B
113.3%
33.1%
$6.4B
$2.6B
2021
$6.2B
$2.2B
$1.9B
$2.3B
81.2%
35.6%
$7.4B
$1.8B
2022
$5.5B
$1.4B
$1.2B
$1.4B
54.5%
25.1%
$7.4B
$1.8B
2023
$5.9B
$1.6B
$1.9B
$1.7B
48.4%
27.2%
$7.0B
$2.1B
2024
$7.1B
$2.1B
$2.5B
$2.2B
57.7%
29.0%
$7.4B
$2.4B
2025
$7.7B
$2.5B
$2.6B
$2.6B
60.7%
31.9%
$7.0B
$2.4B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
MOODYS CORP /DE/ (MCO) — Investment Memo
🐂 The Bull Case (Warren's voice)
The Ultimate Toll Bridge: MCO doesn't just sell a service; it sells a requirement. To access the global debt markets, an issuer must pay the toll. It is the definition of a "must-have" product.
Pricing Power by Proxy: They don't compete on price; they compete on acceptance. Because investors demand a Moody's rating, MCO can raise fees without losing customers. The cost of the rating is a rounding error to the issuer, but the value of the rating is the key to the capital.
Asset-Light Compounding: A 60.7% ROE tells you everything. They aren't building factories or buying fleets; they are leveraging intellectual property and a regulatory seal of approval.
The Data Pivot: The shift from one-time rating fees to recurring data subscriptions transforms a cyclical business into a predictable annuity.
Attractive Range: We don't buy "great" businesses at "any" price. This becomes a Berkshire-grade investment when the price reflects a stagnant future, despite the evidence of a growing one.
🐻 The Bear Case (Charlie inverts)
"Show me where I'll die and I won't go there."
Scenario 1: The Regulatory Guillotine: The moat is built on NRSRO status. If the SEC or global regulators decide the "Oligopoly" is a systemic risk and dismantle the legal preference for these agencies, the fortress vanishes overnight. The moat is legal, and laws can be changed.
Scenario 2: The Trust Paradox: The business relies on the illusion of objectivity. If a systemic failure occurs where MCO's ratings are proven not just wrong, but fraudulent or captured by issuers (2008 on steroids), the network effect reverses. Investors stop trusting the seal → Issuers stop paying for it.
Scenario 3: Algorithmic Disintermediation: A world where real-time, transparent, AI-driven credit analysis replaces the "opinion" of a rating agency. If the market moves to a decentralized, data-driven credit score, the "Standard" becomes a relic.
The Most Likely Threat: Regulatory intervention. Governmental distaste for "too big to fail" financial gatekeepers is a permanent tailwind for disruption. Timeframe: 5–10 years.
💰 Valuation & Margin of Safety
Reacting to the DCF of $328.00 based on an 8.8% FCF growth rate.
Intrinsic value estimate: $328.00 per share.
25% margin of safety entry: $246.00(Conservative entry for a high-quality asset).
50% margin of safety entry: $164.00(The "Fat Pitch" — virtually impossible unless the world is ending).
Current Status: Expensive. If the market is trading significantly above $328, we are paying for perfection and a growth rate higher than 8.8%.
Verdict: WATCH
The moat is a masterpiece, but the price is a problem. We do not pay a premium for a "toll bridge" when the toll collector is already priced for an eternity of growth. Keep on the list for a $246.00 entry.
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.