The Desk

1. 1

   Gentex Corp

   GNTX

   Gentex designs and makes electronic rearview mirrors for cars, and has added biometric security, premium audio and fire-safety products.

   Within marginBerkshire would buy the whole businessQuality compounderGood business, out of favourHigh return, low price

   $20.87 against a base value of $33.9639% margin

   Why it’s here4 flags

   Ten years of filings show no loss years and an average return on equity of 19%, while the share price of $21.01 sits 38% below the base-case value of $33.96. The bear case of $20.01 is below the current price, so the margin depends on the base-case assumptions holding.

   Berkshire would buy the whole business

   • Lowest pre-tax income (5 years) (at least $75.0M)$369.7M
   • Loss years (at most 0)0
   • Return on equity (avg) (at least 15%)19%
   • Lowest ROE (at least 10%)16%
   • Debt payback (at most 3.0 yrs)0.0 yrs

   Quality compounder

   • Years of filings (at least 8)15
   • ROIC (avg) (at least 12%)23%
   • Lowest ROIC (at least 8.0%)17%
   • Years of positive owner earnings (at least 8)10
   • Operating margin volatility (at most 6.0%)4.2%
   • Share count change (CAGR) (at most 1.0%)-3.2%

   Good business, out of favour

   • Years of filings (at least 8)15
   • Return on equity (avg) (at least 12%)19%
   • Loss years (at most 1)0
   • P/E vs own median (at most 0.8×)0.7×

   High return, low price

   • Market value (at least $50.0M)$4.6B
   • ROIC (avg) (at least 20%)23%
   • Earnings yield (EBIT / EV) (at least 10%)11%

   What the first read flagged

   • The 2024 and 2025 purchases of VOXX, BioConnect and GalvanEyes take the company into audio and biometrics, areas outside the mirror business that built its record.
   • Almost all sales come from car makers and their suppliers, so vehicle production levels pass straight through to results.
   • The risk factors name raw material, energy and electronics cost increases, along with uncertainty in pricing negotiations with customers.
   • The retained earnings test fails: -0.5× of market value has been created for each dollar kept in the business.
2. 2

   Federated Hermes, Inc

   FHI

   Federated Hermes is a US investment manager that earns fees for running funds, money market funds and separate accounts for institutions and individuals.

   Within marginBerkshire would buy the whole businessQuality compounderHigh return, low price

   $55.25 against a base value of $102.3746% margin

   Why it’s here2 flags

   The screens flagged a long record of profits, with 30% average return on equity and an 8.3% owner earnings yield. Those numbers are worth checking against the revenue mix.

   Berkshire would buy the whole business

   • Lowest pre-tax income (5 years) (at least $75.0M)$306.2M
   • Loss years (at most 0)0
   • Return on equity (avg) (at least 15%)30%
   • Lowest ROE (at least 10%)22%
   • Debt payback (at most 3.0 yrs)1.0 yrs

   Quality compounder

   • Years of filings (at least 8)15
   • ROIC (avg) (at least 12%)36%
   • Lowest ROIC (at least 8.0%)24%
   • Years of positive owner earnings (at least 8)10
   • Operating margin volatility (at most 6.0%)3.0%
   • Share count change (CAGR) (at most 1.0%)-3.0%

   High return, low price

   • Market value (at least $50.0M)$4.2B
   • ROIC (avg) (at least 20%)36%
   • Earnings yield (EBIT / EV) (at least 10%)13%

   What the first read flagged

   • Money market funds make up a little over half of revenue, and their fees depend on how much cash investors keep in them, which moves with short-term interest rates.
   • The filings say money market funds can lose money and that the company may have to support them with its own capital.
3. 3

   Sprouts Farmers Market, Inc

   SFM

   Sprouts runs a chain of smaller specialty grocery stores in the United States, built around a large fresh produce section and natural and organic food.

   Within marginQuality compounderGood business, out of favourHigh return, low price

   $64.26 against a base value of $133.5552% margin

   Why it’s here3 flags

   The screens flagged a long run of profits, a 28% average return on equity and a 12× earnings multiple, with a 51% margin of safety against the base-case value. The open question is whether the recent margin of 7.8% holds.

   Quality compounder

   • Years of filings (at least 8)15
   • ROIC (avg) (at least 12%)28%
   • Lowest ROIC (at least 8.0%)15%
   • Years of positive owner earnings (at least 8)10
   • Operating margin volatility (at most 6.0%)1.1%
   • Share count change (CAGR) (at most 1.0%)-4.5%

   Good business, out of favour

   • Years of filings (at least 8)15
   • Return on equity (avg) (at least 12%)28%
   • Loss years (at most 1)0
   • P/E vs own median (at most 0.8×)0.7×

   High return, low price

   • Market value (at least $50.0M)$6.4B
   • ROIC (avg) (at least 20%)28%
   • Earnings yield (EBIT / EV) (at least 10%)11%

   What the first read flagged

   • Food prices move with inflation and deflation, and the filing warns that rival price cuts could squeeze Sprouts' margins and sales.
   • Latest operating margin of 7.8% sits well above the 5.5% ten-year average, and the excerpts do not show whether that lift will last.
   • The excerpts contain no debt or lease schedule, so the debt-free reading in the screens cannot yet be checked against the filing text.

The Desk is general research, and the list is the same for everyone; your lens only filters and orders what you see. It describes how companies measure against Buffett’s and Graham’s documented tests. It is not a recommendation to buy or sell anything, and it doesn’t know your circumstances. Prices are refreshed nightly.