Pat Dorsey Follows Buffett’s Lessons To Pick Stocks

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Pat Dorsey Follows Buffett’s Lessons To Pick Stocks by William Green, Barron’s Asia

Pat Dorsey ran Morningstar’s equity research department from 2000 to 2011, ultimately overseeing an army of more than 100 analysts. He became fascinated with Warren Buffett’s observation that certain companies possess an “economic moat” — a sustainable competitive advantage that enables them to maintain exceptionally high returns on capital. Dorsey and his team at Morningstar studied almost half a century of corporate data to identify the characteristics that these winning businesses have in common.

Eager to prove the validity of his findings, Pat Dorsey longed to manage money. After a stint as the director of research at Sanibel Captiva Trust, he launched his own investment firm in January 2014. Based in Chicago, Dorsey Asset Management invests money for foundations, endowments, and wealthy individuals. Dorsey, 43, finally has the chance to apply everything he has learned about investing. Following what he calls a “global moat strategy,” he has constructed a highly concentrated portfolio of 13 stocks from as far afield as Malaysia, Brazil, and Germany.

We caught up with Dorsey by telephone during his latest research trip to South Africa. He shared his strong opinions about excessive fund fees, the “sin” of failing to close large funds, and why he prefers investing outside of the U.S.

Barron’s: How did your experience at Morningstar influence your approach when it came to creating your own investment firm?

Pat Dorsey: I was fortunate to amass this huge mental database of fund managers while I was at Morningstar. You can see what works, what doesn’t work, who treats investors well, who doesn’t, who’s “all hat and no cattle,” as the Texans say. I’ve seen enough asset-management firms succeed and fail that I have a decent idea, not just from an investment perspective but also from a structural perspective, of what works for clients and what’s likely to get them in trouble.

What have you done to avoid trouble?


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