Charlie Munger
Over a long enough hold, your return converges on what the business earns on its capital.
| Measure | Formula | Median | Middle half | Reporting it |
|---|---|---|---|---|
| Return on capital employed | Operating income ÷ (equity + total debt) | 10.1% | 5.6% – 16.7% | 444 |
| Return on equity | Net income ÷ shareholders’ equity | 11.7% | 6.3% – 20.4% | 537 |
| Operating margin | Operating income ÷ revenue | 15.0% | 6.0% – 24.7% | 516 |
Where each comes from
| Return on capital employed | The 1994 talk states it as arithmetic rather than preference: “if the business earns 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much different than a 6% return — even if you originally buy it at a huge discount.” Return on capital is therefore the ceiling on a long hold, and the entry price only shifts the path to it. |
|---|---|
| Return on equity | The same argument read on equity, which is the version he and Buffett use when the business carries little debt. |
| Operating margin | His preference for “a great business at a fair price” over “a fair business at a great price” rests on whether the advantage persists, and margin is where persistence shows. |
Source: A Lesson on Elementary Worldly Wisdom, USC 1994; Poor Charlie’s Almanack.
What this cannot tell you
Almost everything else he argues is qualitative — incentives, management quality, the psychology of misjudgement. None of it is in a filing, and nothing here attempts to score it.
This page describes a published method and applies its measures to filings. It is not a score, not a ranking and not a recommendation, and no page here aggregates these into a verdict. · All 11 metrics