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
$23.4B
$1.0B
$2.5B
$953.4M
13.0%
4.4%
—
—
2017
$26.8B
$1.6B
$3.6B
$1.6B
17.1%
5.9%
—
—
2018
$32.0B
$2.6B
$6.0B
$2.5B
24.2%
8.2%
—
—
2019
$39.0B
$4.0B
$5.9B
$3.8B
29.0%
10.2%
—
—
2020
$42.7B
$5.7B
$6.7B
$5.8B
33.5%
13.4%
—
—
2021
$47.7B
$3.4B
$7.5B
$3.4B
18.4%
7.0%
—
—
2022
$49.6B
$722.0M
$6.6B
$736.0M
4.5%
1.5%
—
—
2023
$62.1B
$3.9B
$10.4B
$3.9B
19.2%
6.3%
—
—
2024
$75.4B
$8.5B
$14.8B
$8.5B
33.1%
11.3%
—
—
2025
$87.7B
$11.3B
$17.2B
$11.3B
37.3%
12.9%
—
—
Warren & Charlie
Buffett / Munger — quality, moat & valuation
PROGRESSIVE CORP/OH/ (PGR) — Investment Memo
🐂 The Bull Case (Warren's voice)
Why the moat compounds: Progressive’s data‑driven underwriting machine gets smarter with every policy written. 30+ years of telematics (Snapshot) creates a cost advantage no competitor can copy overnight. The 37.3% ROE proves the float is working for owners, not against them.
Exceptional economics in plain sight:$17.2B of free cash flow on $87.7B of premiums – a 19.6% FCF margin that beats almost any insurer. No debt, no dilution, and the underwriting cycle is a feature, not a bug (they raise prices, volume sticks).
Attractive entry price: A 25% margin of safety on the DCF means buying below $307/share. At that level, the market is pricing in a permanent loss of underwriting edge – which the data advantage makes unlikely. Buffett would load up at $205/share (50% margin) – the float alone is worth more.
🐻 The Bear Case (Charlie inverts)
Scenario 1 – The tech ambush: A cash‑rich competitor (Tesla, Google, Amazon) offers auto insurance at cost, using real‑time driving data and zero need for underwriting profit. Progressive’s 12.9% margin becomes a target, not a moat. Regulation slows it, but doesn’t stop it – 5–10 years.
Scenario 2 – Permanent claims inflation: If repair costs, medical bills, and legal settlements keep rising faster than premium adjustments, the combined ratio stays above 100. 2022 was a warning – net income crashed 80%. A repeat that lasts 3+ years would cut ROE to single digits and destroy the growth narrative.
Scenario 3 – The data trap: Progressive’s own pricing models become commoditized as AI‑driven underwriting spreads. If every insurer can price like Progressive, the cost advantage evaporates. The moat becomes a puddle in 10 years.
Most likely: The tech disruption is low‑probability but high‑impact. The inflation cycle is the real near‑term risk – and Progressive has no control over it.
💰 Valuation & Margin of Safety
DCF intrinsic value:$409.81/share ($240.1B total) – assumes 8% FCF growth, 10% discount, 3% terminal – reasonable but optimistic given cyclicality.
25% margin of safety (conservative entry):$307/share – where the market prices in one bad cycle.
50% margin of safety (Buffett’s ideal):$205/share – where the float alone justifies the price.
Current price (assumed ~$400):Fair to slightly expensive. The market is paying full price for a moat that’s 87% dependent on auto insurance pricing cycles. No margin for error.
Verdict: WATCH
Progressive is a spectacular cash machine run by honest, skilled managers – but its moat is narrow and cyclical. At $400, you’re paying for perfection in a business that just proved it can lose 80% of earnings in a single year. Wait for $307 or watch from the sidelines.
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.