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
$37.0B
$8.9B
$12.5B
$8.6B
18.8%
24.0%
—
$20.2B
2017
$37.8B
$9.5B
$12.1B
$8.4B
17.5%
25.0%
—
$21.8B
2018
$39.4B
$3.6B
$13.7B
$3.0B
7.7%
9.1%
—
$21.6B
2019
$39.5B
$11.1B
$12.9B
$10.7B
50.9%
28.1%
—
$20.5B
2020
$39.1B
$10.1B
$11.6B
$10.0B
83.9%
25.9%
—
$37.2B
2021
$40.5B
$13.7B
$13.8B
$13.1B
262.4%
34.0%
—
$30.1B
2022
$42.4B
$6.7B
$5.0B
$4.2B
—
15.8%
$0
$21.4B
2023
$50.0B
$8.5B
$8.5B
$2.3B
792.5%
17.0%
—
$9.8B
2024
$53.0B
$10.5B
$11.8B
$6.7B
120.3%
19.8%
—
$10.5B
2025
$57.4B
$12.4B
-$394.0M
-$4.9B
60.8%
21.7%
—
$10.8B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
ORACLE CORP (ORCL) — Investment Memo
🐂 The Bull Case (Warren's voice)
The "Mission-Critical" Moat: Oracle doesn't sell software; it sells certainty. When a global bank or a national government stores its core ledger in an Oracle database, the cost of switching isn't just a line item—it's a corporate heart transplant.
Pricing Power via Inertia: The "Hotel California" effect is a powerful engine for margins. They don't need to be the most innovative company in the valley; they just need to be too painful to leave.
Cloud Transition: If they successfully migrate their legacy on-premise base to OCI (Oracle Cloud Infrastructure), they convert lumpy license fees into an infinite annuity.
Attractive Entry: This becomes a Berkshire-style play only if the market stops valuing it as a "AI Growth Story" and starts valuing it as a "Legacy Utility."
The Price of Admission: We only swing when the price reflects the stagnation of the legacy business, not the promise of the cloud.
🐻 The Bear Case (Charlie inverts)
“Show me where I'll die and I won't go there.”
The "Accounting Mirage": The gap between Net Income ($12.4B) and FCF (-$0.4B) is a screaming siren. When profits are a result of accounting entries rather than cash hitting the bank, you aren't buying a business—you're buying a spreadsheet.
CapEx Treadmill: To compete with AWS and Azure, Oracle is forced into a brutal capital expenditure war. They are spending billions on data centers just to stay relevant. This isn't compounding; it's treading water in a gold-plated suit.
The Open-Source Erosion: The "Hotel California" is developing a back door. The rise of PostgreSQL and cloud-native databases is slowly chipping away at the proprietary lock-in. The moat is drying up, not widening.
The Most Likely Death: A permanent impairment caused by capital misallocation. Management is spending cash they don't have (based on FCF) to build a cloud empire they may never dominate. Timeframe: 3–5 years.
💰 Valuation & Margin of Safety
Reacting to the DCF: $173.7B Total / $61.89 per share.
Intrinsic value estimate: $61.89
25% margin of safety entry: $46.42(conservative)
50% margin of safety entry: $30.95(Buffett's ideal)
Current Status: Grossly Expensive.
The market is pricing in a flawless AI-driven cloud ascent. Our DCF reflects the reality of the cash flows. The gap between the current market price and intrinsic value is an abyss.
Verdict: PASS
The price is a fantasy that ignores the catastrophic divergence between net income and free cash flow. While the switching costs provide a durable moat, we do not pay growth-stock multiples for a legacy-plumbing business. We will wait for the "AI hype" to evaporate and the price to return to the realm of sanity.
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.