Buying Companies With Economic Moats

This episode is brought to you by:

CFA Institute. CFA Institute the global association of investment professionals whose mission is to lead the investment profession by promoting the highest standards of ethics, education, and professional excellence for the ultimate benefit of society. CFA Institute serves a global community of investment professionals working to build an investment industry where investors' interests come first, financial markets function at their best, and economies grow. The Chartered Financial Analyst credential is the most respected and recognized investment management designation in the world.

[00:02:23] – Transition from the sell-side to the buy-side and the biggest surprise

[00:03:40] – What is a moat?

[00:05:16] – What part of the stock market universe has a moat

[00:06:57] – Pat’s framework for identifying a moat, starting with intangibles

[00:08:32] – The power of brands

[00:09:44] – What chance does an upstart have to come in and usurp a well-established brand

[00:12:24] – Switching costs as part of the framework for identifying a moat

[00:14:55] – The third component of identifying a moat, network effects, and what businesses should do to effectively build one

[00:17:29] – Last component, cost advantages/economies of scale

[00:19:29] – How do you analyze these four components in an investing framework that can be built into an actual strategy

[00:21:13] – How does Pat think about this from a mispricing standpoint 

[00:23:37] – How does Pat incorporate the current price of a company in consideration for future returns when pricing a moat

[00:25:39] – How should a company with a moat operate to protect that characteristic, especially when it comes to their capital allocation

[00:26:51] – Which characteristic of a moat does Pat find most intriguing

[00:30:35] – What makes for good and smart capital allocation

[00:35:58] – What is Pat’s process for identifying the best investment opportunities

[00:38:38] – What are good economics when looking at a company

[00:41:03] – If Pat could take any business, but have to swap leadership, what would he choose

[00:44:13] – Back to his process of finding investment opportunities 

[00:46:05] – Kindest thing anyone has ever done for Pat