Moat-opoly Profits

Lecturing at Google

Pat Dorsey, 43, spent years researching equities for Morningstar and writing books about finding companies with "economic moats." Two years ago he founded Dorsey Asset Management to put his ideas into action. From today's Barron's interview [bold added]:

We’re never going to launch a bond fund. People should fire me if I do. We make long-only investments in stocks. We mainly run separate accounts, and we charge a flat fee. I like separate accounts because they give investors transparency about what they own, and they prevent the investment vehicle from becoming a black box. Also, we have no locks, no gates, none of this crap.

I like his operational philosophy: no going outside of his area of expertise (stocks), a fee structure that's not heads-the-manager-wins and tails-the-investor-loses, and separate investor accounts so that the investor can see the holding in each stock, not combined in a Dorsey "fund".

More gems:

Investing is one of the few fields in which you actually don’t get what you pay for. If you blindly spend $50,000 on a car, it will probably be better than a $5,000 car. But can you say categorically that a fund charging 150 basis points is better than one charging 75? Absolutely not. They can just get away with it.

not every manager needs to be insanely brilliant....you just find a great business run by a smart manager who has the ability to reinvest excess free cash flow at a high incremental rate of return.

The single best thing any investor can do is to not have a TV and a Bloomberg terminal in their office. I have to walk 50 feet down the hall to look at stock prices or check the news on our portfolio. It’s like checking e-mail obsessively: You get a little dopamine rush. But as we all know logically and rationally, it’s utterly nonproductive.

Pat Dorsey invests in companies with pricing power sustainable over the long haul because of economic moats. In the old days this attribute was called "barriers to entry", but that term sounds so 20th century.

So far he's invested in only 13 companies (PD: "I’m not sure why anyone would want to expend mental effort on their 32nd best idea.") Your humble observer would endeavor to be a customer, but Pat Dorsey's company has built its own moat: a $5 million minimum entry price.

Pat Dorsey's Google lecture was 70 minutes long, but I found it interesting throughout.