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
$19.9B
$4.2B
—
$2.8B
21.2%
21.2%
$15.0B
$1.3B
2017
$21.2B
$10.7B
$4.0B
$9.6B
43.1%
50.4%
$16.9B
$1.3B
2018
$22.8B
$6.0B
$5.2B
$4.7B
29.2%
26.1%
$22.4B
$1.3B
2019
$5.4B
$5.9B
$5.2B
$4.7B
32.7%
109.9%
$25.2B
$831.0M
2020
$5.2B
$5.3B
$5.6B
$4.6B
31.5%
102.3%
$26.7B
$1.8B
2021
$21.8B
$6.5B
$6.1B
$5.8B
46.1%
29.9%
$29.7B
$960.0M
2022
$24.9B
$7.0B
$5.7B
$5.6B
57.5%
28.1%
$33.3B
$973.0M
2023
$24.1B
$6.4B
$4.8B
$5.1B
43.1%
26.4%
$32.6B
$1.1B
2024
$24.3B
$6.7B
$5.9B
$5.7B
39.9%
27.8%
$31.2B
$1.0B
2025
$24.5B
$7.1B
$5.5B
$5.8B
38.7%
29.1%
$31.8B
$1.3B
Warren & Charlie
Buffett / Munger — quality, moat & valuation
UNION PACIFIC CORP (UNP) — Investment Memo
🐂 The Bull Case (Warren's voice)
The Ultimate Toll Bridge: UNP doesn't just have a moat; it owns the castle, the moat, and the only bridge into town. You cannot replicate 30,000 miles of track across the Rockies. The geography is the moat.
Exceptional Economics: It is a legal monopoly on the movement of heavy freight in the Western US. This grants immense pricing power—when the cost of fuel or labor rises, the rails simply adjust the tariff.
The "Irreplaceable" Factor: As long as the US moves grain, coal, and chemicals, UNP collects a check. It is a bet on the physical existence of the American West.
Attractive Entry: To interest Berkshire, we need the price to reflect the actual cash produced, not the accountant's dreams. We buy when the market treats this as a struggling utility rather than a dominant monopoly.
🐻 The Bear Case (Charlie inverts)
The "Paper Profit" Trap: The gap between Net Income ($7.1B) and FCF ($5.5B) is a flashing red light. If the cash isn't hitting the bank, the earnings are a fiction. The 2019-2020 margins (NI > Revenue) suggest an accounting alchemy that would make a promoter blush.
Scenario 1: The Regulatory Guillotine: The federal government decides rail is a "natural monopoly" and imposes strict price caps or nationalizes the network. Pricing power vanishes overnight.
Scenario 2: Autonomous Freight Disruption: If autonomous trucking solves the "long-haul" cost problem, the structural cost advantage of rail evaporates. The tracks become stranded assets.
Scenario 3: The Debt Spiral: $31.8B in debt is a heavy anchor. If FCF continues to lag behind NI, the company is using debt and "lazy" buybacks to mask a decaying core.
Most Likely Threat: Regulatory intervention on pricing (3–7 year horizon). The more they squeeze the shippers, the more the government will squeeze them.
💰 Valuation & Margin of Safety
The DCF provides a sobering reality check against the market's optimism.
Intrinsic value estimate: $147.73 per share
25% margin of safety entry: $110.80(conservative)
50% margin of safety entry: $73.87(Buffett's ideal)
Current Status: Expensive. The business is a goldmine, but the current price is paying for gold that hasn't been mined yet. We are paying a premium for "paper profits" while the actual FCF growth is a pedestrian 4.1%.
Verdict: PASS
The intrinsic value of $147.73 is far below current market levels. While the moat is impenetrable, the accounting quality is suspect and the debt load is too high for the current price. We wait for a panic to get this at a genuine discount.
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.