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Invest Like the Best with Patrick O'Shaughnessy
Pat Dorsey Returns - The Moat Portfolio - [Invest Like the Best, EP.77]
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Show Notes
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My guest this week, back for a second conversation, is Pat Dorsey. Pat ran equity research at Morningstar before leaving to start his own asset management company: Dorsey Asset Management. His areas of deep interest are competitive advantage and capital allocation. He believes that capital allocation should be in service of competitive advantage and invests in a concentrated portfolio that he and his team feel embody these ideas.
If you have not already, I strongly recommend listening to our first conversation, which is a sort of crash course on moats. In this conversation, we cover different ground. We spend much more time on individual stocks like Facebook, Google, and Chegg, using them as examples to explore Pat’s investment philosophy and strategy.
Across a few conversations with Pat, I can tell he is in love with this stuff, and I always enjoy talking to investors like him who so passionately pursue and edge. Please enjoy round two with Pat Dorsey.
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
Follow Patrick on Twitter at @patrick_oshag
Links Referenced
Pat Dorsey's first appearance on the podcast
HQ - Live Trivia Game Show
Books Referenced
World After Capital
Principles: Life and Work
Show Notes
– (First Question) – Pat’s methods for valuing a business
– Is this process done after they would first identify potential targets for investment
– Pat’s take on how the market classifies stocks as growth vs value
– Qualitative insights and why the market can’t price them very accurately
– The business model behind zero marginal cost distribution business model
– Network effects and the potential downside to them down the road
– Valuing Facebook as a business heavily reliant on network effects
– What would have to change for Pat’s position on Facebook to radically change
– Most important lessons that a smaller/private business could learn from Facebook or Google’s business models
– Where is Amazon in Pat’s portfolio
– An example of where primary research led to a big surprise about a company
– The value of travel in this business, starting with recent travel to India
– Why are they targeting India and Japan
– How does he think about the risk of investing in foreign markets
– His thinking on relative vs absolute market share
– Exploring the SaaS business model
– The application of moats and pricing power with SaaS businesses
– Pat Dorsey's first appearance on the podcast
– Other models that Pat explores and how to screen for them
– How does he parse the difference between attention and demand
– How would Pat monetize something like HQ - Live Trivia Game Show that has aggregated massive amount of attention
– How does Pat react to the idea that attention is scarce and human capital is so crucial
– World After Capital
– How does Pat evaluate human capital in a business
– Experience in starting an asset management business
– What are the levers that are biggest value drivers in the asset management business
– Pat’s view on the strength of the relationship between risk and return
– The most risk Pat has taken in the face of uncertainty
– Favorite recent learning resource
– Principles: Life and Work
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag
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