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
$13.4B
$3.6B
$4.1B
$3.7B
34.3%
26.9%
$3.6B
$1.2B
2017
$15.0B
$3.7B
$4.7B
$3.5B
35.6%
24.6%
$4.1B
$1.7B
2018
$15.8B
$5.6B
$6.1B
$5.0B
62.0%
35.4%
$5.1B
$2.4B
2019
$14.4B
$5.0B
$5.8B
$4.9B
56.3%
34.9%
$5.8B
$2.4B
2020
$14.5B
$5.6B
$5.5B
$5.7B
60.9%
38.7%
$6.8B
$3.1B
2021
$18.3B
$7.8B
$6.3B
$6.1B
58.3%
42.4%
$7.7B
$4.6B
2022
$20.0B
$8.7B
$5.9B
$6.9B
60.0%
43.7%
$8.7B
$3.0B
2023
$17.5B
$6.5B
$1.3B
$2.6B
38.5%
37.2%
$11.2B
$3.0B
2024
$15.6B
$4.8B
$1.5B
$1.5B
28.4%
30.7%
$13.6B
$3.2B
2025
$17.7B
$5.0B
$2.6B
$2.4B
30.7%
28.3%
$14.0B
$3.2B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
TEXAS INSTRUMENTS INC (TXN) — Investment Memo
🐂 The Bull Case (Warren's voice)
The Plumbing of Modernity: TXN doesn't sell "gadgets"; they sell the essential analog components that allow electricity to talk to data. If it has a battery or a plug, it likely needs a TXN chip.
The "Designed-In" Lock: The moat isn't just a brand; it's an engineering nightmare. Once a TXN chip is integrated into a car's braking system or a factory's sensor, the cost to switch is not the price of the chip—it's the cost of re-engineering the entire product. That is a beautiful form of pricing power.
The 300mm Edge: By aggressively pivoting to 300mm wafers, they are playing a game of scale that competitors cannot afford to join. Lower cost per chip is a permanent competitive advantage that manifests as higher margins over decades.
Attractive Range: This becomes a "fat pitch" if the market panics over short-term capex and pushes the price toward the $30 - $40 range, allowing us to buy a dominant toll-bridge on the global electronics highway at a steep discount.
🐻 The Bear Case (Charlie inverts)
The Capex Trap: Management is betting the farm on new fabs. If the world enters a structural decline in industrial analog demand, these factories aren't assets—they are expensive monuments to hubris.
The Debt Delusion: Ballooning debt from $3.6B to $14.0B while margins are collapsing is a lethal combination. They are leveraging the balance sheet to fund capacity that the market may not want. You don't borrow heavily to build more of something you can no longer price aggressively.
The FCF Chasm: Accounting profits are a fairy tale here. A $2.6B FCF against $5.0B NI means the business is consuming more cash than it produces. When the "earnings" are just ink on a page but the cash is flowing out the door to fund failing margins, the business is decaying.
Most Likely Failure: A "Permanent Capacity Glut." Over the next 3–5 years, if competitors catch up or demand shifts, TXN will be stuck with massive fixed costs and zero pricing power. That is how a compounder becomes a value trap.
💰 Valuation & Margin of Safety
Reacting to the provided DCF of $42.20 per share:
Intrinsic value estimate: $42.20
25% margin of safety entry: $31.65(conservative)
50% margin of safety entry: $21.10(Buffett's ideal)
Current Status: Grossly expensive. Unless the stock is trading in the $30s, we are paying for a growth story that the cash flow statements flatly contradict.
Verdict: PASS
The current price is detached from the reality of the shrinking FCF. We cannot ignore the dangerous trend of ballooning debt paired with cratering margins. The moat is wide, but the bridge is currently on fire.
Research Notes· Money Model · Moat · Financials · Management
Data sourced from SEC EDGAR XBRL filings (10-K only). For educational purposes — not investment advice.