Dorsey Asset Management

#### I. Institutional Overview The Q4 2025 13F filing for Dorsey Asset Management, led by the renowned investment strategist Pat Dorsey, offers a masterclass in high-conviction, moat-oriented portfolio management. To understand the shifts within this portfolio, one must first understand the psychological and philosophical framework of its architect. Pat Dorsey, formerly the Director of Equity Research at Morningstar, is perhaps the world’s foremost practitioner of "Moat Investing"—a strategy centered on identifying companies with sustainable competitive advantages that allow them to earn high returns on capital for extended periods. As of December 31, 2025, Dorsey Asset Management manages a reported 13F equity portfolio valued at approximately **$1.15 billion**. While this scale is modest compared to multi-billion-dollar hedge fund titans, the institutional "psychological portrait" revealed by the data is one of extreme focus and unwavering discipline. With only **10 holdings** in the entire portfolio, Dorsey operates with a level of concentration that would make even the most aggressive fund managers pause. This is not a portfolio designed to track an index; it is a collection of "best ideas" where each position must justify its existence against a rigorous set of qualitative and quantitative criteria. The stability of the portfolio value, hovering around the $1.15 billion mark, suggests an institution that is not currently in a massive capital-gathering phase but is instead focused on optimizing the capital it already stewards. The "number of stocks" metric is particularly telling. A portfolio of 10 stocks implies that the top positions carry immense weight, and any single movement—be it a 10% gain or a 10% loss—has a profound impact on the overall fund performance. This "conviction-heavy" style suggests that Dorsey Asset Management views itself more as a part-owner of businesses rather than a trader of tickers. In the current market environment of Q4 2025, such concentration signals a belief that diversification is a hedge against ignorance. By limiting the portfolio to 10 names, Dorsey is signaling to the market that he believes he has identified the ten best risk-adjusted opportunities available in the global equity markets. This approach requires an incredible amount of due diligence and a high threshold for volatility. When an institution holds only 10 stocks, it cannot hide behind "closet indexing." Every decision to add to a position or trim a holding is a deliberate act of capital reallocation based on a shifting perception of value or risk. The psychological state of the firm appears to be one of "selective aggression." While the broader market may be grappling with macroeconomic uncertainty, Dorsey is doubling down on his highest-conviction ideas (like ASML) while ruthlessly pruning legacy positions that may no longer meet his stringent "moat" or valuation requirements (like Alphabet). This suggests a transition from a "buy and hold" phase into a "portfolio optimization" phase, where the manager is actively recycling capital from mature moats into emerging opportunities or reinforcing existing winners. In summary, Dorsey Asset Management enters 2026 as a lean, highly focused investment vehicle. The institution's profile is characterized by a "quality-at-any-price" (or at least "quality-at-a-reasonable-price") mindset, where the durability of a company's competitive advantage is the primary filter. The current portfolio structure reflects a manager who is comfortable with high tracking error and who prioritizes deep fundamental understanding over broad market exposure. This is a "sniper" approach to investing, where every bullet—every dollar of AUM—is aimed at a specific, well-vetted target. #### II. Sector Allocation Analysis The sector allocation of Dorsey Asset Management in Q4 2025 provides a window into the firm’s macro-thematic priorities and its judgment on where the most durable economic moats currently reside. Unlike diversified funds that spread bets across all eleven GICS sectors, Dorsey’s portfolio is surgically concentrated in five key areas, reflecting a total disregard for benchmark weighting. | Sector | Weight (%) | Trend | | :--- | :--- | :--- | | Healthcare | 29.33 | Stable/Core | | Communication Services | 22.59 | Decreasing (Active Trim) | | Technology | 17.89 | Increasing (High Conviction) | | Industrials | 15.18 | Stable/Core | | Consumer Discretionary | 15.00 | Increasing (New Entry) | | Others | 0.01 | Negligible | **2.1 Concentration and Macro Judgment** The most striking feature of this allocation is the concentration in the top three sectors—Healthcare, Communication Services, and Technology—which collectively account for nearly **70%** of the portfolio. This indicates a "barbell" strategy that balances defensive, high-certainty cash flows (Healthcare) with high-growth, platform-based businesses (Technology and Communication Services). The heavy weighting in **Healthcare (29.33%)** is a classic Dorsey move. Healthcare moats are often built on intellectual property (patents), high switching costs (integrated diagnostic systems), and regulatory barriers. By making Healthcare the largest sector exposure, the firm is establishing a "defensive anchor." This suggests a cautious macro outlook where the manager seeks to insulate the portfolio from economic cyclicality through companies that provide essential services regardless of the GDP growth rate. **2.2 Sector Rotation and Thematic Shifts** While the weights look stable on the surface, the underlying activity tells a story of significant rotation. The **Communication Services** sector, at 22.59%, remains a pillar of the portfolio, but the massive 49.48% reduction in **GOOG (Alphabet)** and the 16.53% reduction in **META (Meta Platforms)** suggest a cooling of enthusiasm for digital advertising giants. This could be interpreted as a macro judgment that the "easy money" in big-cap tech platforms has been made, or perhaps a concern regarding the impact of generative AI on the traditional search and social media moats. Conversely, the **Technology** sector saw a significant boost, primarily driven by the 11.04% addition to **ASML**. This represents a shift from "software/platform" tech toward "mission-critical hardware" tech. ASML’s monopoly on EUV lithography machines is perhaps the widest moat in the entire global economy. By increasing exposure here while cutting Alphabet and Meta, Dorsey is moving "up the value chain"—betting on the indispensable providers of the infrastructure that makes the digital age possible, rather than the platforms that sit on top of it. **2.3 The Rise of Consumer Discretionary and "Experiential" Moats** The **Consumer Discretionary** sector (15.00%) saw a notable evolution this quarter with the new position in **LYV (Live Nation Entertainment)**. Historically, Dorsey has favored companies with high recurring revenue or "toll-bridge" business models. The entry into Live Nation, combined with the existing position in **BKNG (Booking Holdings)**, suggests a thematic bet on the "Experience Economy." As consumers shift spending from physical goods to unique experiences (concerts, travel), companies that control the distribution and ticketing of these experiences develop powerful network effects and supply-side moats. **2.4 Industrials and the "Essential Infrastructure" Theme** The **Industrials** sector (15.18%), represented largely by **AER (AerCap Holdings)**, rounds out the portfolio. AerCap, the world’s largest aircraft lessor, fits the "essential infrastructure" theme perfectly. In a world where airlines prefer asset-light models, the company that owns the planes holds the power. This sector allocation reinforces the idea that Dorsey is looking for "real-world" moats—assets that are difficult to replicate and essential for global commerce and mobility. **2.5 Macroeconomic Inference** From this allocation, we can infer that Dorsey Asset Manageme ---