Wednesday, I added another new position to our family portfolio. In my most recent strategy blog post, I wrote about a podcast episode featuring a conversation with Pat Dorsey, an asset manager whom I greatly admire. One of the businesses he mentioned was Gartner; the consulting company focused on IT. Dorsey used Gartner as an example to describe a business with a moat based on its trustworthy reputation; clients pay for counsel from Gartner because they trust Gartner to provide expert knowledge.
One mention from a podcast guest is not enough to own shares, but Gartner was also a recent recommendation for the Motley Fool newsletter to which I subscribe. The Fool touted Gartner’s recent acquisitions and ability to provide “uniquely valuable services and advice to its growing roster of more than 11,000 global enterprise clients.”
Business durability is one of the characteristics I most admire in a company. I intend to purchase companies with sustainable businesses that have the potential to remain permanent constituents of our portfolio. A business model like Gartner’s is attractive because, like law practices, consulting businesses are built and sustained on culture and reputation. Clients choose Gartner because of their expertise and prestige, but the reputation also attracts talented consultants. This self-perpetuating cycle is a desirable investment.
As with the recent JD.com purchase, I split the expected Gartner investment into two purchases to diversify the cost basis and mitigate exposure to market-timing effects. The Gartner holding is projected to be about one percent of the overall portfolio, so the initial purchase was roughly 50 basis points of the portfolio’s value.