Pat Dorsey > Quotes

“Unless a company has an economic moat protecting its business, competition will soon arrive on its doorstep and eat away at its profits. Wall Street is littered with the dead husks of companies that went from hero to zero in a heartbeat.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“One annual report is worth 10 speeches by a Federal Reserve chairman.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“Thinking about moats can protect your investment capital in a number of ways. For one thing, it enforces investment discipline, making it less likely that you will overpay for a hot company with a shaky competitive advantage. High returns on capital will always be competed away eventually, and for most companies—and their investors—the regression is fast and painful.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“The structure of the book is the same as the basic investment process that we advocate: Develop a set of investing principles, understand the company’s competitive environment, analyze the company, and value the stock. If you can follow this process while avoiding most big mistakes, you’ll do just fine as an investor.”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

“Identify businesses that can generate above-average profits for many years. 2. Wait until the shares of those businesses trade for less than their intrinsic value, and then buy. 3. Hold those shares until either the business deteriorates, the shares become overvalued, or you find a better investment. This holding period should be measured in years, not months. 4. Repeat as necessary.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“The basic investment process is simple: Analyze the company and value the stock. If you avoid the mistake of confusing a great company with a great investment—and the two can be very different—you’ll already be ahead of many of your investing peers. (Think of Cisco at 100 times earnings in 2000. It was a great company, but it was a terrible stock.)”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

“1. Identify businesses that can generate above-average profits for many years. 2. Wait until the shares of those businesses trade for less than their intrinsic value, and then buy. 3. Hold those shares until either the business deteriorates, the shares become overvalued, or you find a better investment. This holding period should be measured in years, not months. 4. Repeat as necessary.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“Direct-sold retail funds can be great for investors, but sometimes they can work against the fund companies that market them. Throughout the recent bear market, advisor-sold funds did a better job in retaining their assets because financial advisors were able to prevent clients from selling in a panic. A little handholding goes a long way in convincing clients to ride out the turbulent markets.”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

“the likelihood that those estimated future cash flows will actually materialize (risk), how large those cash flows will likely be (growth), how much investment will be needed to keep the business ticking along (return on capital), and how long the business can generate excess profits (economic moat).”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“The difference between Cisco Systems CEO John Chambers and Enron’s Kenneth Lay is far easier to recognize with the benefit of 20/20 hindsight.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“• Besides fixed assets, an industrial company needs to manage working capital efficiently.”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

“you can simply buy wonderful companies at reasonable prices, and let those companies compound cash over long periods of time. Surprisingly, there aren’t all that many money managers who follow this strategy, even though it’s the one used by some of the world’s most successful investors. (Warren Buffett is the best-known.)”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“Network-based businesses tend to create natural monopolies and oligopolies.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“Even the Best Company Will Hurt Your Portfolio If You Pay Too Much for It.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“I went back and read all the Berkshire Hathaway annual reports. My life changed course as a result.”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

“The best engineer in the world can’t build a 10-story sandcastle.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“Going against the grain takes courage, but that courage pays off. You’ll do better as an investor if you think for yourself and seek out bargains in parts of the market that everyone else has forsaken, rather than buying the flavor of the month in the financial press.”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

“Wait until the shares of those businesses trade for less than their intrinsic value, and buy.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“unless a company has some kind of economic moat, predicting how much shareholder value it will create in the future is pretty much a crapshoot, regardless of what the historical track record looks like. Looking at the numbers is a start, but it’s only a start. Thinking carefully about the strength of the company’s competitive advantage, and how it will (or won’t) be able to keep the competition at bay, is a critical next step.”
― Pat Dorsey, The Little Book That Builds Wealth: The Knockout Formula for Finding Great Investments

“Next, divide free cash flow by sales (or revenues), which tells you what proportion of each dollar in revenue the firm is able to convert into excess profits. If a firm’s free cash flow as a percentage of sales is around 5 percent or better, you’ve found a cash machine—as of mid-2003, only one-half of the S&P 500 pass this test. Strong free cash flow is an excellent sign that a firm has an economic moat.”
― Pat Dorsey, The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market