Pat Dorsey: The Nuances of Investing in Moats (Capital Allocators, EP.509)

Pat Dorsey is the Founder of Dorsey Asset Management, a $1.7 billion global public equity manager focused on companies with competitive advantages and long investment runways. Pat created Morningstar’s moat research framework and led its equity research efforts for a dozen years before launching his firm in 2014. Our conversation covers the nuances of investing in businesses with wide moats — quantitative analysis, switching costs, network effects, brands, management, alignment, capital allocation, and reinvestment runways. We then turn to Pat’s application of moat analysis to his own investing: concentration, global scope, position sizing, decision-making, and the lessons he’s learned running a 12-stock portfolio for over a decade. Chapters 00:00 Cold open 00:16 Pat’s early path — from comparative politics to Morningstar 02:00 Landing at Morningstar as equity coverage begins 03:41 The question Michael Porter never answered 04:18 Building the first quantitative moat rubric 06:50 Why ROIC alone no longer signals a moat 08:23 The case for a qualitative lens 09:38 Costco, Medline, and scale economies shared 10:05 Switching costs cut both ways 13:41 How Pat thinks about brand moats 16:56 Buffett’s “any idiot” line — and why it misleads 18:20 Assessing management: humility over brilliance 20:56 Reading alignment — “I” versus “we” 23:50 Founder-led businesses: no free pass 27:52 Capital allocation is a rare, unlearned skill 33:09 The most common misconceptions about moats 40:53 Why reinvestment runway matters more than the moat itself 42:02 Narrowing 1,700 companies down to 12 44:18 The US advantage: SEC oversight and manager quality 46:49 What it takes for a non-US business to qualify 48:46 Inside Dorsey’s research process 50:56 How Pat approaches valuation 55:22 Position sizing and the 15% ceiling 57:01 Confidence versus stubbornness 59:19 What keeps a name out of the portfolio 1:01:10 What actually drives a sell decision 1:02:32 The single biggest lesson from 12 years 1:05:16 The “weird isn’t wonderful” mistake 1:08:21 Transparency and earning client trust 1:13:37 Closing round: pizza, best advice, and pet peeves Any leader should see for themselves the benefits of elite coaching. Try ALEX: tryalex.admiredleadership.com. Subscribe: @capitalallocatorspodcast Visit: https://capitalallocators.com Follow Ted: Twitter: tseides Capital Allocators is the podcast for institutional investors. Host Ted Seides conducts in-depth conversations with the world's most sophisticated allocators and managers. Editing and post-production work for this episode was provided by The Podcast Consultant (⁠https://thepodcastconsultant.com⁠) #PatDorsey #MoatInvesting #CapitalAllocators #ValueInvesting #InstitutionalInvesting