A quick multi-thread on the importance of Economic Moats and How to Evaluate them when studying businesses:
Pat Dorsey is one of the leading figures that breakdown this topic succinctly.
First, Why Moats Matter (1/6)
2/ The Three Types of Moats:
If you are a b-school graduate - You're familiar.
However, IMO - For any investor, Atleast one of the following factors have to be present in any good investment.
3/ The Three Key Reasons Why they matter long-term:
+ Increase business value
+ Reduce risks
+ Pricing arbitrage
4/ Once you have Economic moats present.
It doesn't stop there.
A good investor continues watching how an operator ReInvests into those opportunities to increase shareholder value:
5/ More on ROIC's and the Reinvestment Ratios:
This thread by @10kdiver and @skhetpal expands more on this important concept.
6/ The qualitative factors + Measuring Reinvestment opportunities are the factors of helping Investors gauge the durability of a business.
As Dorsey says:
"Moats matter because they can increase business value,
reduce business risk, and be inefficiently priced."
7/7 -END:
Pat Dorsey is one of the leading voices that has helped me appreciate the importance of economic moats (this is a core component of evry deep dive/analysis I do)
tl;dr: Investors should watch for moats + Reinvestments Opps
Source to read more:
dorseyasset.com/wp-content/upl…
Any additional points to add: @10kdiver @realdennishong @honam @skhetpal @IrnestKaplan @LiviamCapital - Thanks!
Share this Scrolly Tale with your friends.
A Scrolly Tale is a new way to read Twitter threads with a more visually immersive experience.
Discover more beautiful Scrolly Tales like this.