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
$11.3B
$1.6B
$1.4B
$1.9B
17.2%
14.5%
$6.7B
$3.3B
2017
$12.4B
$1.0B
$961.0M
$1.3B
10.2%
8.2%
$6.6B
$2.5B
2018
$13.6B
$3.6B
$2.0B
$3.9B
30.3%
26.1%
$8.5B
$3.6B
2019
$14.9B
$2.1B
$1.5B
$2.5B
16.3%
14.0%
$10.2B
$4.3B
2020
$14.4B
$1.6B
$2.8B
$2.2B
12.2%
11.1%
$13.2B
$2.9B
2021
$17.1B
$2.0B
$2.7B
$2.7B
13.4%
11.7%
$12.5B
$2.9B
2022
$18.4B
$2.4B
$2.0B
$3.0B
14.2%
12.8%
$11.9B
$1.8B
2023
$20.5B
$3.2B
$3.1B
$3.9B
17.0%
15.4%
$10.9B
$3.0B
2024
$5.2B
$788.0M
$3.5B
$1.5B
3.8%
15.0%
$12.2B
$3.7B
2025
$5.9B
$654.0M
$4.3B
$1.5B
2.9%
11.1%
$14.9B
$4.0B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
STRYKER CORP (SYK) — Investment Memo
🐂 The Bull Case (Warren's voice)
The Surgeon’s Grip: This isn't a commodity business; it's a habit business. When a surgeon treats a Mako robot as an extension of their own hands, the hospital administrator becomes a secondary character. The moat is built on the "cost of retraining," which is effectively infinite for a surgeon who values precision and patient outcomes over a procurement contract.
The Razor-and-Blade flywheel: The capital equipment (robots/tables) is the hook; the implants and disposables are the annuity. We love businesses where the customer must keep paying us to keep the machine they already bought functioning.
Demographic Tailwinds: An aging global population isn't a trend; it's a mathematical certainty. More hips and knees will need replacing. Stryker is simply the most efficient toll booth on that highway.
Attractive Entry: This becomes a Berkshire-grade asset if we can buy it at a price that ignores the "growth" premium and treats it as a steady, compounding utility of the operating room.
🐻 The Bear Case (Charlie inverts)
“Show me where I'll die and I won't go there.”
The Procurement Coup: The moat assumes the surgeon holds the power. If hospital systems successfully shift the decision-making from the operating room to the C-suite—standardizing on the cheapest provider to save margins—the "surgeon loyalty" moat evaporates overnight.
The Balance Sheet Mirage: The divergence between FCF ($4.3B) and Net Income ($0.7B) is a screaming siren. While non-cash charges can be ignored, a collapsing ROE (17% → 2.9%) suggests the company is becoming a clumsy allocator of capital. They are buying growth (Inari) because they are losing it organically (margins sliding 15.4% → 11.1%).
The Regulatory Guillotine: A structural shift in CMS (Medicare) reimbursement for robotic-assisted surgeries. If the government decides "robotic" doesn't justify a premium price over "manual," the pricing power is deleted by a pen stroke in D.C.
Most Likely Threat: Organic margin decay. The most probable failure is a slow bleed where acquisition-led growth masks a rotting core. Timeframe: 3–5 years.
💰 Valuation & Margin of Safety
The DCF suggests a quality business, but the current numbers suggest a messy transition.
Intrinsic value estimate: $400.94 per share
25% margin of safety entry: $300.71(Conservative)
50% margin of safety entry: $200.47(Buffett's ideal)
Current Status: Expensive. Unless the stock retreats toward the $300 level, we are paying for "hope" and "growth" rather than "value" and "certainty."
Verdict: PASS
The moat is wide, but the internal plumbing is leaking. We cannot ignore a collapse in ROE and shrinking organic margins just because the product is great. Wait for a disaster that separates the business quality from the stock price.
Other Analyst Views· Lynch · Damodaran
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.