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
$278.8M
$260.9M
$410.1M
$262.9M
82.1%
93.6%
$2.1B
$791.8M
2017
$301.2M
$304.0M
$371.0M
$306.2M
75.8%
100.9%
$2.1B
$889.5M
2018
$1.4B
$507.9M
$582.5M
$509.0M
—
35.4%
$2.6B
$904.2M
2019
$1.6B
$563.6M
$680.4M
$564.5M
—
36.2%
$3.1B
$1.5B
2020
$1.7B
$601.8M
$789.3M
$609.8M
—
35.5%
$3.4B
$1.3B
2021
$2.0B
$726.0M
$922.6M
$741.4M
—
35.5%
$4.2B
$1.4B
2022
$2.2B
$870.6M
$1.1B
$883.8M
—
38.7%
$4.5B
$993.6M
2023
$2.5B
$1.1B
$1.2B
$1.1B
—
45.4%
$4.5B
$461.7M
2024
$2.9B
$1.1B
$1.5B
$1.1B
—
38.8%
$4.5B
$409.4M
2025
$3.1B
$1.2B
$1.5B
$1.2B
—
38.4%
$6.2B
$515.3M
Warren & Charlie
Buffett / Munger — quality, moat & valuation
MSCI Inc. (MSCI) — Investment Memo
🐂 The Bull Case (Warren's voice)
Moat is durable — switching costs are structural. A pension fund dropping MSCI’s ACWI faces tracking-error, redemptions, and regulatory re‑qualification. That’s a lifetime lock‑in.
Economics are exceptional — 38% net margins, 92% recurring revenue (subscriptions + asset‑based fees). FCF ($1.5B) exceeds net income ($1.2B) — no accounting games, just working capital tailwinds.
Pricing power — they’ve raised subscription prices without volume loss. Asset‑based fees ride global capital flows ( ~5% CAGR in AUM). The toll road widens as ETFs proliferate.
Attractive entry — only at a wide margin of safety. DCF gives $755.32/share. With 25% discount ($566.49), the 15% FCF yield covers the debt risk. At 50% discount ($377.66), it’s a no‑brainer for Berkshire’s permanent capital.
🐻 The Bear Case (Charlie inverts)
Regulatory kill shot — if IOSCO or SEC mandates open licensing of benchmark indices, MSCI’s exclusivity vanishes overnight. Low probability, but permanent impairment.
Leverage death spiral — $6.2B debt with negative equity (D/E -2.34x). A 30% drop in AUM‑linked fees (bear market) + 7% interest → interest coverage tanks below 2x. Covenants trip, equity vaporizes. Most likely threat within 5–10 years.
Competitive creep — S&P, FTSE Russell have identical lock‑in. BlackRock ( >10% of Index revenue) could shift to cheaper alternatives (e.g., CRSP). Slow bleed: asset‑based fees plateau, subscriptions stall. Structural, not cyclical.
💰 Valuation & Margin of Safety
Intrinsic value estimate: $755.32 per share (DCF: 15% FCF growth, 10% discount, 3% terminal).
25% margin of safety entry: $566.49 per share — conservative, covers debt tail-risk.
50% margin of safety entry: $377.66 per share — Buffett’s ideal cigar-butt.
Current price (assume ~ $600? not given): fair to slightly overvalued. The leverage specter demands a wider discount before Berkshire takes a seat.
Verdict: PASS
The moat is real but narrowing, and the $6.2B debt fortress-blemished balance sheet disqualifies it for Berkshire’s permanent capital. At $377 it becomes a compelling special situation, but the current price offers no margin of safety against the structural debt and regulatory risks.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.