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The week's question
In March 2025, in the thread "Re: OT, out", Umm asked the members: "Do you think it is because America is made up of magical soil that makes businesses based in America magically profitable?" This week it is put to everyone again. The button below opens the small thread re-asking it - read what others have said so far, then give your own answer as an ordinary reply.
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Stocks A to Z / Stocks B / Berkshire Hathaway (BRK.A)
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Author: BreckHutHigh ⎊  😊 😞
Number: of 22352 
Subject: OT:Hyperscaler Capex Returns
Date: 09/18/26 5:31 PM
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No. of Recommendations: 4
Since BRK owns both GOOGL and AAPL and this has been a general topic of discussion, thought it was worth posting a recent Morgan Stanley Report authored by Michael Mauboussin And Dan Callahan. If the assumptions and methodology are correct, the forward ROIC figures generally look pretty good.

To Free or Not to Free
(Cash Flow)
September 17, 2026

Summary

"This report addresses five topics.

First, we provide a working definition of FCF and examine where some leading technology companies stand today using results and consensus forecasts.

Second, we examine whether the acceleration of investment spending changes each company’s position within the life cycle.

Third, we calculate return on incremental invested capital (ROIIC). This figure attempts to assess the return on the marginal dollar invested in the business. When invested capital grows, a company that has an ROIIC above its current ROIC will see its ROIC rise. One that has an ROIIC below ROIC will see its ROIC fall. ROIC, considered in tandem with growth, helps explain valuation. Specifically, the spread between ROIC and the cost of capital is positively correlated to the ratio of enterprise value to invested capital, and that correlation tends to rise further when growth is also considered. Moreover, changes in ROIC are positively associated with total shareholder returns.

Fourth, we look at the relationship between free cash flow and ROIC, similar to what we show for Walmart in exhibit 1.

Finally, we look at how consensus estimates have changed for key value drivers, including sales, earnings before interest and taxes (EBIT), EBIT margins (EBIT ÷ sales), and capital expenditures. This provides some sense of what determines ROIIC."

morganstanley.com - Article tofreeornottofree ltr
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This community has written 21,861 posts about Berkshire Hathaway. The article-length ones it recommended most:
BRK: Why Not XOM? · 62 recs · 2024
Second quarter comments · 60 recs · 2023
Berkshire's Profit Contributors · 58 recs · 2023
Summary of 2Q 2026 · 55 recs · 2026
3Q Summary · 53 recs · 2024
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