The Buffett Lens

My dear friend, imagine if you will, a humble pipe underground—quietly doing its job day in and day out, carrying away the rain and waste without a fuss or fanfare. That's the kind of business I admire: one that keeps the world flowing smoothly, even if folks don't give it a second thought until there's a problem. Advanced Drainage Systems, Inc., with its thermoplastic pipes and water management gizmos, reminds me of just such a reliable conduit. They've been channeling profits steadily, and that's the sort of outfit that catches my eye, much like spotting a good fishing hole that's always full of fish.

Now, let's talk about what makes this company tick, aligning it with the principles I've always held dear. First off, they've got that consistent earning power I prize so much. Over the last eight quarters, their revenue has held steady around $700 million per quarter, and net income hasn't strayed far from $100 million. Last twelve months, they racked up $3 billion in revenue and $500 million in net income. That's the kind of predictability that lets a business owner sleep at night, like a farmer who knows his crops will come in rain or shine. Their return on equity stands at 23.5%, averaging 24.1% over five years—solid numbers that show they're making good use of their capital without piling on debt. In fact, their debt-to-equity ratio is just 0.72 times, which is about as low as a cautious squirrel's nut stash. I always say, as I did back in 1979, that the real test is a high earnings rate on equity without undue leverage or funny accounting tricks. This team seems to get that.

And don't get me started on their economic moat—it's like a sturdy castle wall keeping competitors at bay. With a score of 71 out of 100, they've built it through long-term contracts and the hassle of switching suppliers. Once a builder picks their pipes, it's no small thing to change horses mid-stream, especially with products like those leachfield chambers and purification systems. That's the kind of advantage that lasts, reminding me of the 1985 letter where I noted that a great manager in a lousy business still ends up with a lousy outcome, but here the business fundamentals are strong. Management quality? Well, insider ownership is a modest 6.8%, and institutions hold 95.9%, which suggests alignment but not the deep personal stake I'd love to see. Still, as I wrote in 1990, much of the value comes from talented managers, and these folks seem to be rowing effectively in a good boat.

Of course, no business is perfect, and I'd be remiss not to mention the shortcomings humbly. This is a cyclical affair, tied to construction and infrastructure spending, which can ebb and flow with the economy. If housing starts slow down or governments tighten their belts, revenues might not keep that steady pace. Competition could heat up too—plastics and pipes aren't rocket science, so others might try to undercut or innovate. And while their moat is decent, it's not impregnable; environmental regs or material costs could throw a wrench in the works. The valuation, with a P/E of 25.1 times and P/B of 5.9 times, isn't screaming "bargain," but it's not overpriced for what they're delivering. Our overall Buffett Score of 71.9 out of 100 reflects that balance—strong in many ways, but not without its warts.

All told, I see long-term potential here, the kind that rewards patient investors. Advanced Drainage Systems is in an essential business, helping manage water in a world where storms and growth keep demanding more pipes. If you can buy at around $139 a share and hold for the long haul, weathering short-term squalls, it could prove a sensible addition to your portfolio. As I often say, it's better to buy a wonderful business at a fair price than a fair business at a wonderful price. For those looking to act on this, the ticker for Advanced Drainage Systems, Inc. on eToro is $WMS.

Fellow investor,

Imagine you're walking through a bustling farm market on a crisp autumn day. All around you, folks are haggling over tomatoes and corn, but the real backbone of it all—the stuff that helps those plants grow tall and strong—isn't on display. It's the fertilizer, that humble bag of nutrients that nobody talks about much, yet without it, the harvest would be a sorry affair. That's CF Industries for you: a company that quietly powers the world's food supply by churning out ammonia and nitrogen fertilizers. They're like the unsung heroes of agriculture, making sure our fields yield bounties that feed families far and wide.

Now, let's talk about what makes this outfit worth a closer look, in the way I like to size up businesses. I've always said that the true test of a company's mettle is how well it earns a good return on the equity capital employed, without resorting to funny accounting or piling on debt like it's going out of style. CF delivers on that front—its return on equity is a solid 30.1% lately, and over the past five years, it's averaged around 21.9%. That's not bad for a business that produces the building blocks of plant food. They've got consistent earning power, too; their revenues have climbed steadily, from nothing in some quarters to nearly $2 billion in others, with last twelve months' net income hitting $1.5 billion on $7.1 billion in sales. It's like owning a reliable old tractor that keeps chugging along, year after year.

What really gives this company a leg up is its economic moat—that wide ditch around the castle that keeps the competition at bay. With a score of 72.5 out of 100, CF benefits from cost advantages and smart access to resources, which let them produce ammonia and fertilizers cheaper than many others. Think of it as having the best spot on the river for a mill: they get the water (or in this case, natural gas and other inputs) flowing their way efficiently. And while their debt isn't zero—debt-to-equity is 0.75 times—they're not overleveraged, which means they can weather storms without tipping over.

Management-wise, it's a mixed bag. Insider ownership is just 0.4%, which doesn't scream deep personal commitment, and institutional investors hold a whopping 106.6% of the shares—wait, that can't be right, but anyway, it shows big money is in on this. Our job at Berkshire is to find talented managers and give them room to run; here, the team seems to be rowing steadily, though I'd prefer a bit more skin in the game from the folks at the helm. Still, they've built value through smart operations, not just riding industry waves.

Of course, no business is perfect, and I'd be remiss not to mention the hurdles. Fertilizers are tied to commodity prices, which can swing like a pendulum on a windy day—up when farmers are flush, down when crops are plentiful or costs bite. The sector's cyclical nature means earnings can fluctuate with global weather patterns, trade wars, or even droughts that cut demand. And while their moat is sturdy, it's not impregnable; new technologies or competitors could nibble at the edges. Plus, environmental regs are tightening, and producing ammonia ain't the greenest game in town, though CF is working on cleaner methods.

All that said, I see long-term potential here. The world needs more food, and CF is positioned to help grow it—literally. At a price-to-earnings ratio of 9.8 times, a price-to-book of 2.9, and an enterprise value to EBITDA of 4.8, this seems reasonably priced for a business with such solid fundamentals. It's the kind of company where patience pays off: buy when others are fretting about the next market dip, hold for the intrinsic value to shine through, and remember, our gain comes from owning great businesses over time, not chasing the latest fad. If you're eyeing this for your portfolio, it could be a sensible addition, much like adding a dependable tool to your shed.

For those looking to act on this, the ticker for CF Industries Holdings, Inc. on eToro is $CF.

Stay curious,

Warren

My dear friend,

Let me tell you about RPM International Inc., a company that's been quietly building value much like a skilled carpenter crafting a sturdy home from the ground up. You see, RPM doesn't make flashy gadgets or chase the latest trends; instead, it's in the business of specialty chemicals that help keep buildings sealed, roofs watertight, and floors polished. From waterproofing systems to sealants and even roofing services, they provide the essential ingredients for construction and maintenance across industries. It's like the reliable glue that holds things together without anyone noticing—until it's missing. Operating in segments like construction products and consumer goods, RPM serves both big contractors and everyday folks, making it a versatile player in the basic materials world.

Now, let's talk about what makes this outfit tick, aligning with the principles I've always cherished. First off, RPM boasts a solid record of consistent earning power, with revenues hovering steadily between $1.8 billion and $1.9 billion per quarter over the past two years, and net income right around $200 million. That's the kind of steady hum that reminds me of a well-tuned engine—nothing flashy, but dependable. Their return on equity clocks in at 21.3% lately, averaging 22% over five years, which speaks to efficient use of capital without piling on undue leverage. As I wrote back in 1979, the real test is achieving high earnings on equity without gimmicks, and RPM passes that with flying colors. Their debt-to-equity ratio of 0.92 times is modest, meaning they're not borrowing trouble to boost returns. And let's not forget their economic moat, rated at 73.2 out of 100, built on cost advantages and smart resource access—it's like having a castle wall that keeps competitors at bay, protecting pricing power and margins.

On the management side, while insider ownership is modest at just 1.3%—I'd prefer a bit more skin in the game from the folks running the show—the institutional ownership at 83.7% suggests plenty of smart money is backing them. This ties into my 1985 thought that a good business can elevate even average managers; here, the fundamentals are strong enough that talented leaders can shine. Their return on equity of 51% back in 1990 was a high-water mark, but even at today's levels, RPM's managers are driving value through operational excellence rather than just riding industry waves.

That said, no investment is without its humble shortcomings, and I wouldn't be doing right by you if I didn't mention them. Valuation metrics like a price-to-earnings ratio of 19.9 times and price-to-book of 4.2 times aren't screaming "bargain" at first glance, though they're reasonable for a company with RPM's growth potential. The sector—basic materials—can be sensitive to economic swings, like housing slowdowns or raw material costs, which might squeeze margins during tougher times. And while their moat is decent, it's not impregnable; competition could heat up if new entrants find ways to undercut costs. Management's low insider stake also gives me a slight pause, as I'd rather see leaders with a bigger personal bet on success. Still, these aren't deal-breakers for a long-term holder; they're just reminders to tread thoughtfully.

Looking ahead, RPM has real long-term potential in a world where infrastructure and home improvement never go out of style. Their consistent earnings, high returns on equity, and protective moat suggest a business that can compound value over time, much like a fine oak tree growing steadily. At $98.84 a share and a market cap of $12.7 billion, it's not outrageously priced if you believe in the fundamentals—and remember, as I noted in 1996, intrinsic value trumps book value, and our expectations must be tempered by reality. This could be a sensible buy for patient investors who value enduring businesses over short-term thrills. Just like waiting for compound interest to work its magic, owning RPM rewards those who hold through ups and downs. For those looking to act on this, the ticker for RPM International Inc. on eToro is $RPM.

Stay curious, my friend. Investing is a marathon, not a sprint.

Warm regards, Warren Buffett

Well, howdy there, neighbor. You know, I've always thought of investing like tending a garden. You plant seeds in good soil, water 'em with patience, and over time, you harvest what's grown. But if you rush it or pick the wrong plot, you end up with weeds instead of veggies. Today, let's talk about Newmont Corporation, a gold-mining outfit that's been digging for treasure since 1916, headquartered right there in Denver, Colorado. It's like a seasoned prospector who's been panning for gold and other shiny metals across the globe—from the Americas to Australia and even Papua New Guinea. They're not just chasing yellow metal; they've got their eyes on copper, silver, and more, with operations in a dozen countries or so. It's a business built on extracting what's buried deep in the earth, and in my book, that's a timeless pursuit, much like farming the land for crops that folks have always needed.

Now, let's dig into what makes this operation tick, using some of the yardsticks I like to measure. First off, this company's got a knack for consistent earning power, which is the real heart of any business. Over the last eight quarters, their revenue has bounced from zero to a sturdy $6.8 billion, and net income has climbed to $1.3 billion—nothing flashy, but steady as an old plow horse. Looking at the last four quarters, they hauled in $22.7 billion in revenue and $7.1 billion in net income. Their return on equity sits at a healthy 20.9% lately, with an average of 12.6% over five years. That's the kind of earnings rate on the capital they've got working that I admire, as long as it's not propped up by fancy accounting tricks or too much borrowing. And speaking of borrowing, Newmont keeps its debt light—debt to equity is just 0.17 times. That's like owning a farm with a modest mortgage; you're not leveraged to the hilt, so you can weather a dry spell without selling the tractor.

This outfit has built itself a wide moat, too, much like a castle surrounded by a deep, wide ditch that keeps the invaders at bay. Their moat score is a solid 78.9 out of 100, thanks to cost advantages in mining and access to rich resources. It's not just about how hard they work—though they do that—but about stepping into a business "boat" with good fundamental economics, as I've said before. The quality of the mine matters more than the pickaxe. They've got talented managers at the helm, and while insider ownership is on the low side at 0.3%, institutions hold 80.9%, which means plenty of smart money believes in it. Those managers have driven real value, just like how our folks at Berkshire have turned good businesses into something extra special.

Of course, no garden's perfect, and I'd be remiss not to mention the risks humbly. Mining's a volatile business—gold prices can swing like a weather vane in a storm, and with operations spread across so many countries, there's always a chance of political squabbles or regulatory hurdles that could trip things up. Inflation might nibble at those earnings, turning a 20% return into less in real terms if prices keep climbing. And while their valuation looks reasonable—price to earnings at 17.2 times, price to book at 3.6 times, and enterprise value to EBITDA at 8.5 times—markets can be fickle, and book value isn't the same as intrinsic value, which is what really counts. Our own Berkshire has seen that growth rates from the past don't always repeat, and Newmont's no different.

All in all, though, I see long-term potential here. Gold's been a store of value for centuries, a hedge against uncertainty, and Newmont's got the scale and smarts to keep producing it efficiently. At today's price around $101.52, with a market cap of $110.8 billion, it strikes me as a sensible buy for patient investors who understand that intrinsic value grows over time, not overnight. If you're looking to invest with a long horizon, this could be a solid plot in your garden—provided you hold through the ups and downs, just like waiting for tomatoes to ripen. For those looking to act on this, the ticker for Newmont Corporation on eToro is $NEM. Happy investing, and remember, it's the tortoise that wins the race.

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My friends, imagine you're strolling through a neighborhood where every house is getting a fresh coat of paint, and the folks who live there are proud of how it looks – not just for show, but because it keeps their homes sturdy and weatherproof for years to come. That's the kind of company PPG Industries is to me. They're in the business of making paints, coatings, and specialty materials that help build and protect things we all use every day, from the walls in our homes to the cars we drive and the bridges we cross. It's like being the quiet craftsman who ensures the world doesn't fade away or rust out.

Now, let's talk about what makes PPG tick, and why it aligns with some of the things I've learned over the years about finding solid businesses to invest in. First off, this outfit has a decent economic moat, much like a castle with a wide moat that keeps the invaders at bay. Their moat score is a solid 72.5 out of 100, built on cost advantages and smart access to resources. They don't just slap paint on things; they've got global reach in places like the U.S., Europe, and Asia, with segments that cover everything from home decorating to industrial coatings that toughen up factories and airplanes. It's the kind of business where the fundamentals are strong – they generate steady earnings without needing to borrow a fortune or play accounting games to look good.

Take their return on equity, for instance. At 19.8% lately, that's earning a good rate on the money they've invested in the business, and they do it with debt that's manageable at about 1 times equity. No undue leverage here, which is important because, as I once said, the real test is earning well on your capital without tricks. Their revenue has been climbing steadily over the past eight quarters, from zero to nearly $4 billion per quarter, and net income has followed suit, up to $300 million or so. Last twelve months, they pulled in $15.9 billion in revenue and $1.6 billion in profits. It's not flashy, but it's consistent, like a reliable old tractor that keeps plowing year after year.

Management-wise, they've got talented folks running the show who are creating extra value, as we've seen in our own Berkshire businesses. Their operating managers seem to be doing a fine job, though I always like to see some skin in the game – insider ownership is just 0.1%, which is low, and institutions hold 91.4%, so the crowd is betting big. But remember, as I noted back in 1985, the business boat matters more than how hard you row. PPG's boat is in a good ocean: basic materials that people need, even in tough times, because homes and industries always need coating and protection.

That said, no business is perfect, and I wouldn't be honest if I didn't mention a few humps in the road. Their average return on equity over the past five years is just 3.5%, which suggests some volatility – maybe from market swings or costs that don't always cooperate. Inflation can bite, as I warned in 1979, turning what looks like good earnings into something less impressive if prices keep rising. And while their moat is wide, competition from cheaper overseas players could nibble at edges. Valuation-wise, with a price-to-earnings ratio around 16.3 times and price-to-book at 3.2 times, it's not screaming "bargain" like some underpriced gems, but it's reasonable for a company earning well without overpaying.

All in all, PPG strikes me as a sensible long-term hold for patient investors. At $106.69 a share and a market cap of $23.9 billion, it's priced in a way that could reward those who look past the noise and focus on intrinsic value, not just the ups and downs of the stock price. Their Buffett score of 69.3 out of 100 tells me they're in the ballpark for quality, and with steady demand from housing, autos, and industry, they could grow modestly over the years. Just like planting an apple tree – it takes time to bear fruit, but it does. For those looking to act on this, the ticker for PPG Industries, Inc. on eToro is $PPG. Stay patient, my friends; good things come to those who wait.