Schwar Capital Research

April Portfolio Update

Schwar Capital Research — Tue, 05 May 2026 11:50:50 GMT

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The SCR portfolio is up 12.5% year-to-date.

The S&P 500? 5.3%.

That’s roughly a 7% spread since the start of the year.

Discipline Through the Round Trip

Last month I wrote about the importance of not freezing in a sell-off. About leaning on Lee Freeman-Shor’s framework from The Art of Execution - that when you have conviction in a business and the price drops, you have to be willing to act.

I followed through this month.

The position I’d flagged last month for an add got the add. The price had moved against me, the thesis hadn’t, and there was no fundamental reason behind the drawdown to justify standing still.

So I sized up.

A New Research Portal for Paid Subscribers

The bigger announcement this month: I’m launching a new research portal for all paid subscribers later this month.

Everything in one place - every write-up, every watchlist, the full portfolio, and a clearer way to follow each thesis as it develops.

No more digging back through the archive to find the original write-up on a position.

It will all be there, organised, searchable, and updated alongside each new post.

This has been on my list for a while.

Building this out properly takes the research from “a series of posts” into something closer to a research platform - one place to track the entire process, end-to-end.

If you’ve been thinking about upgrading, this is the moment.

Pricing will increase later this year, so existing subscribers and anyone who upgrades before launch will lock in the current rate.

Upgrade Today!

In the Rest of This Post

A position I closed this month, and why I no longer like the setup
The details on this month’s add, and where the position now sits
The earnings calendar for the next two weeks
The new ideas I’m tracking - including one I’ve recently published research on
How I’m thinking about portfolio construction from here

The Biology of Bad Decisions

Schwar Capital Research — Fri, 01 May 2026 15:16:53 GMT

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There’s a French expression for twilight: l’heure entre chien et loup.

The hour between dog and wolf.

It describes the moment at dusk when the light fails and you can no longer tell if the shape moving toward you is a familiar dog or a dangerous wolf.

Friend or threat. Safe or fatal.

Former Wall Street trader turned Cambridge neuroscientist John Coates borrowed the phrase as the title of one of the most interesting books I’ve ever read on investing.

And here’s why it matters: most investors think their biggest enemy is the market. It isn’t.

It’s their own biology…

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The Body Trades Before the Mind

Coates spent years measuring the hormones of traders on a London trading floor. Cortisol in the morning. Testosterone before lunch. Cortisol again after the close.

What he discovered should change how every investor thinks about risk:

Decisions we believe are rational and considered are, in fact, downstream of physiological states we never even notice.

By the time the conscious mind weighs an investment, the body has already reacted. Heart rate has shifted. Hormones have surged. Risk appetite has been set.

Coates puts it bluntly:

“Risk is not just an idea. It is a bodily sensation.”

Investing, in other words, is not purely an intellectual exercise. It’s a physiological one.

And the markets pay people who don’t realise this.

The Winner Effect: Why Bull Markets Make Us Stupid

Coates’ most provocative finding involves a phenomenon he calls the winner effect.

When a trader wins, testosterone rises. With elevated testosterone comes greater confidence, greater appetite for risk, and a willingness to take on larger positions.

Win again, and testosterone climbs higher. Risk appetite expands further.

It is, on paper, a useful adaptation - confidence backed by results. But in markets, this feedback loop becomes a trap.

The trader who has been right ten times in a row is not ten times smarter than the trader who has been right five times.

They are, however, biochemically primed to take on dramatically more risk.

This is how bull markets end. Not with a sudden change of mind, but with a gradual chemical drift toward overconfidence among the people moving capital.

As Howard Marks has noted:

“The greatest risk doesn’t come from low quality or high volatility. It comes from paying prices that are too high.”

And we pay prices that are too high precisely when we feel most certain. Which is precisely when our biology is least trustworthy.

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The Cortisol Crash: Why Drawdowns Cripple Judgment

If testosterone is the hormone of bull markets, cortisol is the hormone of bear markets.

Cortisol is released in response to stress and uncertainty. In small doses, it sharpens us. In large or sustained doses, it does something far worse:

It rewires the brain to avoid risk at almost any cost.

Coates documented that cortisol levels in traders rose by over 68% during periods of market volatility.

Sustained at those levels, cortisol impairs memory, narrows attention, and triggers a learned helplessness that turns thoughtful investors into panicked sellers.

This is why drawdowns feel different when you’re in them.

The same investor who confidently bought a business at 50 pounds cannot bring themselves to buy more at 30 pounds - not because the thesis has changed, but because their body has changed.

The opportunity is right there. The biology is in the way.

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Why Markets Bubble and Crash

Put these two hormones together and you have an explanation for market cycles that no behavioural finance textbook can match.

Bull markets are not just stories about earnings or innovation.

They are also, at the level of the people involved, stories about collectively rising testosterone - confidence breeding confidence, risk appetite breeding more risk appetite, until the people deploying capital are biochemically incapable of restraint.

Crashes are not just stories about debt or fraud.

They are stories about collectively rising cortisol - fear breeding fear, paralysis breeding paralysis, until the people who should be buying are biochemically incapable of acting.

This is why the same patterns repeat in every cycle, with different protagonists and different technologies. The hormones don’t change. The humans don’t change.

Charlie Munger captured the essence of it:

“The world is full of foolish gamblers, and they will not do as well as the patient investor.”

The patient investor wins because they have done the harder work - they have learned to act despite their biology, not because of it.

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What This Means for How We Invest

Coates’ work is not academic curiosity. It has direct, practical implications for how serious investors should structure their process.

Five lessons stand out:

Treat winning streaks as warning signs, not vindication. The longer you’ve been right, the more your biology is working against you. Recheck your assumptions hardest when you feel most certain.
Build your process for the worst version of yourself. Write your investment theses down when you are calm. Make your buying decisions in advance of drawdowns, not during them. The you that is stressed cannot be trusted to do the work of the you that is rested.
Respect physical state. Sleep, exercise, and time away from screens are not luxuries. They are inputs to your decision quality. A tired investor is a different investor.
Use checklists. Checklists impose process when biology wants to improvise. Every great investor I’ve studied - from Buffett to Klarman to Marks - relies on some form of pre-commitment to overrule in-the-moment instinct.
Lengthen your time horizon. The longer you hold, the less the daily hormonal weather matters. Compounding rewards those who can wait. Biology punishes those who can’t.

The Takeaway

If you remember one thing from this post, make it this:

Your biggest enemy as an investor isn’t the market. It’s the body that’s reading the market. Every bull market top and every panic bottom is, at the level of the people involved, a hormonal event before it is a financial one.

That’s the central lesson of The Hour Between Dog and Wolf. And it connects directly to how we invest at Schwar Capital.

We treat winning streaks as warning signs, not vindication. We write our theses down when we are calm, so the stressed version of us has something to follow. We use checklists to overrule instinct. We size and pace our positions for a long horizon, so the daily hormonal weather doesn’t run our portfolio.

The market doesn’t reward the people with the highest IQ. It rewards the people who can keep behaving rationally when their biology is begging them not to - and who have built a process that holds when their willpower won’t.

That’s how the edge survives. And over time, the edge compounds.

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Thanks for reading,

Dom
Schwar Capital

Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. The opinions expressed here are those of the author and do not necessarily reflect the views of Schwar Capital. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The author may or may not hold positions in the stocks or other financial instruments mentioned. Always do your own research or consult with a qualified financial advisor before making any investment decisions. You can see our full disclaimer here.

10 Stocks I'm Looking at Right Now

Schwar Capital Research — Wed, 29 Apr 2026 12:57:15 GMT

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I like keeping my watchlist concise.

Only the names I’m really interested in following.

These are the names I’ll do write-ups on in the coming months. Obviously, some may drop off and some may become part of the portfolio. But here’s a look at the 10 items currently on it.

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The 10 Stocks

A 30-year-old subsea offshore specialist quietly growing 40% in a contracting industry - new CEO has flipped losses into profits without needing oil to cooperate.
A boring cash-generating piece of internet plumbing being deliberately rebuilt as an acquisition vehicle by a Canadian capital allocator with a documented 200-bagger to his name.
A two-sided network business where every unit sold becomes a permanent royalty annuity. Royalties up 31%, EBITDA up 112%, fresh 10% buyback, and insiders accumulating in the open market.
A vertically integrated avionics turnaround whose systems sit inside aircraft cockpits for 20–30 years. Q1 was a monster, the stock has already run, and now I’m waiting for the entry.
An orphan-drug roll-up that buys rights nobody else will commercialise. The biggest binary catalyst just resolved in shareholders’ favour - with a label far better than I’d modelled.
A capital-light operator riding a structural healthcare workforce shortage of ~1.9M jobs a year. Fourteen straight quarters of double-digit revenue growth and basically no analyst coverage.
An aspiring ingredient brand trying to become the next Gore-Tex. Patented material already embedded in Arc’teryx, North Face, and Black Diamond - and the capacity is about to expand 10x.
A famous compounder cut down 36% on AI fears that probably don’t apply to its actual customer base. Operating income +29%, free cash flow +153%, and the playbook is one of the most respected in capital allocation.
The European cousin of #8 - same playbook, same sell-off, same misunderstanding. Plus a lumpy non-cash accounting charge that scared investors out of a perfectly healthy operating business.
A best-in-class insurance broker compounder hit by a P&C pricing cycle. Stock down ~45%, organic growth flat, but eight acquisitions in Q1 and a $1.15B buyback authorisation say management thinks the cycle is the whole problem.

Revenue Up 33%, EPS Up 87%, and the Data Center Pivot Is Now Real (NASDAQ: PPIH)

Schwar Capital Research — Fri, 24 Apr 2026 11:48:51 GMT

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Perma-Pipe International Holdings published its audited fourth quarter and full-year fiscal 2025 results last Thursday.

The headline: record everything.

Revenue grew 33.1% to $210.9 million.
Net income attributable to common stock grew 88.9% to $17.0 million.
GAAP diluted EPS grew 87% to $2.09 from $1.12.
Income before income taxes grew 49% to $27.5 million, or $29.6 million on an adjusted basis.
Operating income grew 45% to $29.4 million.
Gross profit grew 30.6% to $69.5 million at a 33% margin.

Four days later, on Monday, the company disclosed approximately $54 million in new Q1 2026 project awards - including named AI-enabled data center contracts, the National Research Laboratories project, the Marathon project, and major District Heating & Cooling awards in the United Arab Emirates and Saudi Arabia.

PPIH now has roughly $175 million of visible, awarded work on the books - and that is with three quarters of fiscal 2026 still open to new orders.

The business reports a strengthened working capital position, a modernised global capital structure through a new J.P. Morgan credit facility, and a dedicated new US manufacturing facility in Ohio positioned specifically for AI data centers and the Northeast corridor district heating and cooling market.

The stock is trading around $30, implying a market cap of approximately $245 million.

On trailing numbers, that gives you an EV/EBITDA of approximately 7x.

A trailing P/E of around 14x.

For a business growing revenue at 33%, operating profit at 45%, with contracted backlog visibility, named end-market exposure to the AI infrastructure build-out, and two distinct growth vectors firing simultaneously.

In the rest of this post, I cover:

The audited fiscal 2025 numbers and how the operating leverage shows up
Regional performance across MENA and North America
The Ohio facility and what it means for data center exposure
The J.P. Morgan credit facility and capital structure transformation
The backlog and what fiscal 2026 actually looks like
Bear, base, and bull case valuations
Key developments since December and what I am watching from here

Why 30% of Our Portfolio Sits in One Stock...

Schwar Capital Research — Mon, 20 Apr 2026 11:41:08 GMT

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Ted Williams had a theory. Don’t swing at every pitch.

Divide the strike zone into 77 squares, each the size of a baseball. Wait for the pitch in your sweet spot.

Then crush it.

That’s how he hit .406.

Investing works the same way.

The market throws pitches at us every single day. Most of them are garbage. A few are decent. And once in a while - maybe once or twice a year if you’re paying attention - a fat pitch floats right down the middle.

The problem? Most investors swing at everything.

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The Fat Pitch Rule

Here’s what I believe, and it runs through every position in Schwar Capital:

You don’t get rich by being right about a lot of things. You get rich by being right about a few things - and betting big when you are.

Buffett has said this a hundred different ways.

Munger put it more bluntly:

“The wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.”

That’s the game.

So when I find a business I deeply understand, with a runway I can see, a management team I trust, and a price that doesn’t require heroic assumptions - I don’t buy 2%.

I back the truck up.

Enter Ashtead Technology

Ashtead Technology is now 30% of our portfolio.

And it’s up ~65% year-to-date.

People ask me constantly: “Aren’t you going to trim? Lock in some gains? Rebalance?”

No.

Here’s why:

The thesis hasn’t broken. It’s strengthening. Offshore rental day rates are still climbing. The acquisitions (Seatronics, ACE Winches, Hiretech) are integrating better than I modelled. The subsea rental market is structurally short on kit, and Ashtead owns the fleet. They’ve built something that is very hard to replicate - and the market, in my view, still isn’t pricing it as the cash-compounding machine it is.

When a winner is winning, the worst thing you can do is interrupt the compounding.

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Why Trimming Winners Is a Trap

This is the part most investors get backwards.

We’re told to “rebalance.” To “take profits.” To “never let one position get too big.” That advice is perfect - if your goal is to match the index.

If your goal is to beat it, you have to do the opposite.

The whole point of concentration investing is that your best ideas become more of your portfolio over time. That’s the mechanism. That’s the math. If I’d trimmed every position in Schwar Capital back to 5% every time it ran, I’d have a much smoother equity curve - and a much smaller one.

Winners win. Let them.

The risk isn’t that a great business gets too big in your book. The risk is that you find a great business, size it too small, and then sell it too early.

How I Play It

Look - this is what I do. It’s not for everyone, and it’s definitely not advice.

Running 30% in a single name will make plenty of people lose sleep.

Fair enough. Concentration cuts both ways, and if the thesis breaks on a position this size, it hurts.

I know that. I accept it. That’s the trade I’ve chosen to make.

But the framework, for me, is simple:

Wait for the fat pitch.
When it comes, swing hard.
When you’re right, don’t flinch.

That’s how I invest.

Find businesses I understand well enough to size up. Size them up when the price is right. Then hold on - through the noise, the volatility, and the well-meaning advice from people who think a 30% position is reckless.

For me, a 30% position in a business I’ve studied for years isn’t reckless. A 2% position in a business I barely know is.

But that’s me. Your portfolio is yours. Your risk tolerance is yours. Your circle of competence is yours.

Do the work, find your fat pitches, and size them in a way you can live with - in good years and bad.

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Ashtead is one pitch. It’s the biggest one in the book right now, but it’s not the only one. The rest of the portfolio is built on the same principle - a handful of businesses I know cold, sized with conviction, held for the long arc.

If you want to see the full lineup - what’s in there, at what weight, and why - the entire portfolio is laid out here:

Same philosophy. Different pitches.

Thanks for reading,

Dom
Schwar Capital

A Toll-Booth Microcap Hiding in Plain Sight

Schwar Capital Research — Fri, 17 Apr 2026 11:28:54 GMT

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The company I’m sharing today is a rare case that checks every box on my list:

A genuine toll-booth business. Hardware sold once, royalties collected forever
Revenue up 26%, royalties up 31%, adjusted EBITDA up 112% year-over-year (nine-month YTD)
All interest-bearing debt repaid. CA$16.2M of cash and CA$15.8M of net cash on the balance sheet
Fresh NCIB in place to repurchase up to 10% of the public float
CEO, Chair and CCO all buying on the open market
Reported earnings obscure the real cash-earning power (accounting noise, not operational)
Trading at roughly 12x EV to LTM adjusted EBITDA today, and something closer to 10x on my own forward estimates, despite every operational line moving the right way

I rarely find this many boxes ticked in a single microcap.

Let’s dig in.

Why the Best Decision You Ever Made Might Have Lost You Money (And Why That's Fine)

Schwar Capital Research — Mon, 13 Apr 2026 11:24:38 GMT

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Most investors judge themselves by the wrong scoreboard.

They buy a stock. It goes up. They conclude it was a good decision.

They buy another stock. It goes down. Bad decision.

It feels obvious. Intuitive. Almost unchallengeable.

And it’s completely wrong.

I’ve been reading Thinking in Bets by Annie Duke, a former professional poker player turned decision strategist. The book’s central argument is deceptively simple, but it has profound implications for how we think about investing - and it connects directly to the asymmetric framework we use at Schwar Capital.

The core idea is this: the quality of a decision and the quality of its outcome are not the same thing.

And confusing the two is the most expensive mistake an investor can make.

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The Resulting Problem

Duke calls it “resulting” - the tendency to judge a decision based solely on its outcome.

It happens everywhere. A fund manager buys a speculative biotech stock on a hunch, no real analysis, and it triples because of an unexpected FDA approval. Everyone calls it a brilliant trade. A disciplined investor spends weeks analysing a high-quality business, buys at a reasonable valuation, and then a black swan event tanks the market. Everyone calls it a mistake.

But the first decision was reckless. And the second was sound.

The outcome doesn’t change that. It can’t.

This is the trap.

When we evaluate decisions by outcomes alone, we learn the wrong lessons. We reinforce bad habits that happened to work and abandon good processes that happened not to.

Over time, that feedback loop is lethal.

Every Decision Is a Bet

Here’s where Duke’s framework gets interesting for investors.

She argues that every decision is fundamentally a bet - a wager on an uncertain future with incomplete information. You’re putting something at risk (capital, time, opportunity cost) in exchange for an expected payoff based on your assessment of the probabilities.

Sound familiar?

That’s exactly what investing is. Every position in a portfolio is a bet. You’re staking capital on a thesis about the future, knowing that the future is uncertain and your information is incomplete.

The question isn’t whether you’ll be right every time. You won’t. The question is whether your decision-making process gives you an edge over many repetitions.

This is the same logic that underpins poker, and it’s the same logic that underpins what we do at Schwar Capital. We don’t need to be right on every position. We need our process to produce positive expected value over time.

And that requires separating the quality of the decision from the noise of any single outcome.

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Thinking in Probabilities, Not Certainties

One of the most practical shifts Duke advocates is moving from binary thinking to probabilistic thinking.

Most investors operate in certainties. “This stock is going to double.” “The market is about to crash.” “This company is the next Amazon.”

But the world doesn’t work in certainties. It works in distributions of outcomes with varying probabilities.

When I evaluate a position at Schwar Capital, I’m not asking “will this work?” I’m asking “what’s the range of outcomes, and how do the probabilities weight across that range?”

That’s a fundamentally different question. And it changes everything about how you construct a portfolio.

If there’s a 40% chance a stock triples and a 60% chance it falls 30%, that’s a positive expected value bet - even though you’re more likely to lose than win on any single instance.

The expected value of that bet is positive because the upside in the winning scenario more than compensates for the downside in the losing scenario.

That’s asymmetry expressed through probability.

And it’s why I care far more about the skew of potential outcomes than about whether I think something will “definitely” work.

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The Two Enemies: Hindsight Bias and Motivated Reasoning

Duke identifies two cognitive traps that are particularly destructive for investors.

The first is hindsight bias.

After an outcome occurs, our brains reconstruct the past to make that outcome feel inevitable. “I knew it was going to happen.” No, you didn’t. You assigned some probability to it happening, and it did. But if it hadn’t happened, you’d have reconstructed an equally convincing narrative for why that was obvious too.

Hindsight bias makes us overconfident in our ability to predict the future. It erodes the probabilistic thinking that good investing requires.

The second is motivated reasoning.

We don’t process information objectively. We process it through the lens of what we already believe - and what we want to be true. When we own a stock, we unconsciously weight positive information more heavily and discount negative information. When we’ve sold a stock, we do the reverse.

This is why thesis discipline matters so much. At Schwar Capital, the sell decision is tied to the thesis, not the price. If the business fundamentals have changed in a way that breaks the original investment case, that’s a reason to sell - regardless of whether the stock is up or down. If the thesis is intact and the business is executing, that’s a reason to hold - regardless of what the market is doing in the short term.

Without a clear, pre-defined thesis, motivated reasoning fills the vacuum. And it will always tell you what you want to hear.

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Process Over Outcomes: What This Looks Like in Practice

Here’s how this translates to real portfolio management.

Before entering a position, I try to define the thesis in specific, falsifiable terms. Not “this company is great” but “this company will grow revenue at 15%+ for the next three years because of X, Y, and Z.” That gives me something concrete to evaluate later - a benchmark that isn’t contaminated by the stock price.
When a position goes against me, the question isn’t “how much am I down?” It’s “is the thesis still intact?” A 20% drawdown because of a broad market sell-off is noise. A 20% drawdown because the company lost its largest customer is signal. The response to each should be completely different, even though the P&L looks the same.
When a position works, the discipline is equally important. The temptation is to sell and lock in the gain. But if the thesis is playing out - if the business is executing even better than expected - selling is the wrong decision, no matter how good it feels. You’re cutting off the right tail of the distribution, which is exactly where asymmetric returns come from.
After a position is closed, the review focuses on the process, not the outcome. Did I define the thesis clearly? Did I size the position appropriately for my conviction level? Did I respond to new information rationally, or emotionally? If the process was sound and the outcome was bad, that’s not a failure. That’s variance. If the process was poor and the outcome was good, that’s not a success. That’s luck. And luck runs out.

Why This Is Hard (And Why That’s the Edge)

The reason most investors don’t think this way is because it’s deeply uncomfortable.

It means accepting that you can do everything right and still lose money on a position. It means acknowledging that some of your best returns may have come from flawed decisions that happened to work out. It means resisting the narrative your brain desperately wants to construct after every trade.

Duke uses a concept she calls “the shadow of the future” - the idea that you should make decisions as if you’ll have to explain your reasoning to a group of thoughtful peers, regardless of the outcome. Not justify the result. Explain the process.

The investors who can sustain that mindset - who can stay process-oriented when outcomes are painful, who can resist the pull of resulting, who can think in probabilities rather than certainties - have a structural edge.

Not because they’re smarter. Because they’re more rational. And in a market full of emotional participants, rationality compounds.

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The Takeaway

If you remember one thing from this post, make it this:

A good decision can have a bad outcome, and a bad decision can have a good outcome. What matters is the quality of the process, not the result of any single bet.

That’s the central lesson of Thinking in Bets. And it connects directly to how we invest at Schwar Capital.

We think in probabilities, not certainties. We define our thesis before we buy, and we evaluate against that thesis - not against the stock price. We size positions to reflect our conviction and the skew of potential outcomes. And we judge our decisions by the process, not the result.

The market doesn’t reward the people who are right most often. It rewards the people who think most clearly about risk, probability, and asymmetry - and who have the discipline to act accordingly.

That’s betting with an edge. And over time, the edge compounds.

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Thanks for reading,

Dom
Schwar Capital

Why Your Hit Rate Doesn't Matter (And What Actually Does)

Schwar Capital Research — Fri, 10 Apr 2026 14:39:20 GMT

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Most investors are obsessed with the wrong question.

They want to know: how often are you right?

It sounds logical. If you pick more winners than losers, you should make money. If your hit rate is high enough, the returns will follow.

Except that’s not what the data shows. Not even close.

I’ve been reading Stock Market Maestros by Lee Freeman-Shor and Clare Flynn Levy, which builds on the research from Freeman-Shor’s earlier work The Art of Execution. The findings are striking, and they reinforce something I’ve come to believe sits at the very core of successful investing.

The average hit rate of the eleven elite investors profiled in the book is 51.5%.

Let that sink in. These are some of the best investors in the world. They are right roughly half the time.

The range runs from 43% to 57%. Some of the top performers in the study were wrong more often than they were right.

And yet they all made money. Significant money.

So if being right half the time is enough to generate exceptional returns, what’s actually doing the work?

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The Metric That Matters: Payoff Ratio

The answer is something called the payoff ratio.

It measures how much an investor gains when they’re right relative to how much they lose when they’re wrong. A payoff ratio of 100% means your winners and losers are the same size - you break even before considering hit rate. Anything above 100% means your winners are larger than your losers.

The average payoff ratio across the eleven maestros in the book is 202.5%.

That means when these investors are right, they make roughly twice as much as they lose when they’re wrong. The range is 128% to 288%.

This is the engine. Not stock selection. Not hit rate. The size of the wins relative to the losses.

Think about what that means in practice.

An investor with a 50% hit rate and a 200% payoff ratio makes money - consistently.
An investor with a 70% hit rate and a 50% payoff ratio - right seven times out of ten, but cutting winners early and letting losers run - can still lose money.

The hit rate feels like the important number. The payoff ratio is the one that actually determines outcomes.

Why This Is Really About Asymmetry

This is where the concept connects to something broader.

At Schwar Capital, asymmetry is the lens through which we look at everything.

Every position starts with the question: what’s the downside relative to the upside? If we’re risking £1 for a shot at £5, and we believe the probability favours us, that’s an asymmetric setup.

The payoff ratio is just the portfolio-level expression of the same idea.

When Freeman-Shor studied 1,866 investments across 30,784 trades made by 45 fund managers, what he found was that the behaviour after the buy - how investors managed both winners and losers - was the primary driver of returns.

Not the quality of the initial idea.

Not the analytical framework.

The execution.

The investors who made the most money did two things well. They cut losers relatively quickly, limiting the damage from being wrong. And they let winners run, allowing the right ideas to compound far beyond the initial thesis.

The investors who struggled did the opposite.

They held losers hoping for recovery and sold winners too early to lock in a gain.

That pattern - cutting flowers and watering weeds - is devastatingly common, and it destroys payoff ratios even when the underlying stock picking is sound.

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Asymmetry Beyond Individual Stocks

Here’s what I think gets missed in most discussions about asymmetry: it’s not just a stock-level concept. It applies to the entire way you construct and manage a portfolio.

Position sizing is an asymmetry decision. When you put 15% of your portfolio into your highest-conviction idea and 3% into a speculative position, you’re engineering asymmetry at the portfolio level. If your 15% position doubles, it moves the needle. If your 3% position goes to zero, it’s a rounding error. That’s asymmetry by design.
When you add to winners, you’re compounding asymmetry. Most investors do the opposite - they average down into losers because the price looks cheaper. But adding to a position that’s working, where the thesis is playing out and the business is executing, increases your exposure to something that’s already proving you right. That’s how payoff ratios get above 200%.
Time horizon is an asymmetry lever. The market’s obsession with the next quarter creates a structural advantage for anyone willing to wait. A business that will compound earnings at 20% for a decade but is going through a rough six months is being handed to you at a discount by people who can’t afford to hold it. Your willingness to sit through that is an asymmetric edge.
Even portfolio concentration is an asymmetry choice. Owning 8-12 stocks instead of 50 means your winners have room to genuinely impact your returns. A 5x return on a 10% position transforms your portfolio. A 5x return on a 0.5% position barely registers. The willingness to concentrate is the willingness to let asymmetry work.

The Uncomfortable Truth

The practical implication of all this is that being a good investor feels terrible in real time.

If your hit rate is 50%, you are watching half your positions lose money. That’s not a bug in the system. It’s the system working as designed.

The natural human response to a losing position is to hold on and wait for it to recover.

The natural response to a winning position is to sell it before the gain disappears.

Both instincts feel rational in the moment.

Both destroy your payoff ratio.

Freeman-Shor’s data makes this uncomfortably clear. The difference between good and great investors isn’t the quality of their ideas. It’s the discipline to act against instinct - to cut what isn’t working and let what is working continue to compound.

This is why I’ve written before about the importance of selling based on thesis, not price.

A stock dropping 30% because the market is having a bad week is not the same as a stock dropping 30% because the business model is broken.

One is an opportunity. The other is information.

Being able to tell the difference - and act accordingly - is what builds asymmetric payoff ratios over time.

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How I Think About This in Practice

I’ll be transparent about how this shapes the Schwar Capital portfolio.

When I take a position, I’m already thinking about the payoff structure.

What’s the realistic downside if I’m wrong?

What’s the upside if the thesis plays out?

And - this is the part most people skip - how big could this become if it exceeds expectations?

I want positions where the base case already justifies the investment, but where there are credible scenarios for the business to significantly outperform.

That’s how you build in optionality that can drive a payoff ratio above 200%.

On the loss side, I try to be honest with myself about when a thesis has broken versus when a stock is simply cheap. If the business fundamentals have deteriorated in a way I didn’t anticipate, I’d rather take a 20% loss and redeploy that capital into a better asymmetric setup than hold on hoping to get back to even.

Getting back to even is not an investment strategy. It’s an emotional coping mechanism.

The hardest part is the winners.

When a position doubles, every instinct tells you to take profits. The gain is real, it’s sitting right there, and the fear of giving it back is powerful.

But the data is unambiguous:

The investors with the highest payoff ratios are the ones who can sit through that discomfort and let their best ideas continue to compound.

That doesn’t mean hold forever blindly. It means hold as long as the thesis is intact and the business is executing. The sell trigger should be fundamental, not emotional.

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The Takeaway

If you remember one thing from this post, make it this:

Investment success is not about being right most of the time. It’s about making more when you’re right than you lose when you’re wrong.

That’s the payoff ratio. And it’s driven by how you handle both sides of the ledger - your losers and your winners.

The best investors in the world are right about half the time.

What separates them is that their winners are two to three times the size of their losers. They achieve this through discipline: cutting losses when the thesis breaks and letting winners compound when the thesis is working.

That’s asymmetry applied to portfolio management.

And it’s the same principle that governs how we think about individual stock selection, position sizing, concentration, and time horizon at Schwar Capital.

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The game isn’t about finding more winners. It’s about making your winners count.

Thanks for reading.

Dom
Schwar Capital

The Art of Risk Taking

Schwar Capital Research — Mon, 06 Apr 2026 11:25:48 GMT

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Most investors think risk management means avoiding risk. They think of it as the boring part.

Sun Tzu would disagree.

The Art of War is commonly perceived as a book about aggression. It is, after all, called The Art of War.

But its core message is the opposite.

It is a book about patience, preparation, and knowing when not to act. It is, in many ways, the greatest investing book ever written. It just happens to have been written 2,500 years before the stock market existed.

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I recently read Tobias Carlisle’s book, Soldier of Fortune, which maps Sun Tzu’s principles onto Buffett’s career. It crystallized something I’d been thinking about for a while. I believe the principles in The Art of War, properly understood, describe the optimal framework for asymmetric investing.

The same framework that underpins this newsletter.

This post is an attempt to unpack why that is.

Via Negativa: Winning By Not Losing

The most surprising thing about The Art of War is how much of it is written in the negative. Don’t do this. Avoid that. Do not engage unless conditions are overwhelmingly favorable.

Sun Tzu’s central insight is what philosophers call “Via Negativa”: you get where you’re going by removing what doesn’t work, not by adding what might.

If you eliminate all of the obviously wrong paths, whatever remains is the only path you can take.

This is the most underrated concept in investing.

Most investors spend their time looking for reasons to buy something.

They hunt for catalysts, narratives, upside scenarios. But the best investors I’ve studied do the opposite.

They have a mental checklist of things that kill investments, and they refuse to engage unless none of those conditions are present.

Too much debt. Misaligned management. Cyclical business at peak earnings. Unquantifiable regulatory risk.

If any of these are present, they pass. They don’t care how exciting the story is.

I think about this every time I look at a new position.

The question is never “what could go right?” The question is “what would kill me?” If the answer is “nothing obvious,” then you start doing the real work.

If the answer involves three paragraphs of caveats and rationalizations, you move on.

The positions I’ve been most wrong on share a common trait: I talked myself past a clear disqualifying factor because the upside was too exciting. The positions that have worked best were the ones where I struggled to find reasons not to own them.

Via Negativa also applies to portfolio management. The months where I do the least tend to produce the best outcomes.

Not because inaction is inherently virtuous, but because action for its own sake is inherently destructive. Every unnecessary trade is a chance to introduce error.

Doing less, when you’ve already done the work, is a feature, not a bug.

I’ve written before about how “boring is a feature.” This is the Sun Tzu version of the same idea.

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Defend First: The Ergodicity Problem

Sun Tzu says you must defend before you attack. You secure your own position before engaging.

The reason is simple: if you are destroyed, nothing else matters. There is no second chance.

In investing, this is the ergodicity problem.

If your portfolio goes to zero, it does not matter that your CAGR was 40% for the prior five years. Compounding works in both directions.

A single catastrophic mistake can undo years of correct decisions.

This is why position sizing matters more than stock selection.

You can be right on every thesis and still blow up if you’re sized incorrectly. Conversely, you can be wrong frequently and still compound well if your sizing protects you from ruin.

Sun Tzu actually understood probabilities.

He writes about “balancing the chances of life and death” and uses an archaic ratio, something like a grain to a pound, which is approximately 1 to 6,000.

His point: you should only act when the odds are overwhelmingly in your favor. Not slightly in your favor. Overwhelmingly.

This sounds extreme. But in practice it describes exactly how the best investors behave.

They wait.

They do nothing for extended periods.

And then, when the odds are truly lopsided, they act decisively and in size.

This is the margin of safety concept, but stated more aggressively.

It is not just about avoiding losses. It is about refusing to engage until the setup is so asymmetric that losing becomes very difficult.

This maps directly onto how I think about the positions I write about in this newsletter.

I am looking for situations where the downside is quantifiable and limited, and the upside is a multiple of the current price.

Not a 20% upside with 15% downside. That is not asymmetric.

That is a coin flip with a small edge.

I want setups where a reasonable downside scenario is a 30% correction, and a reasonable upside scenario is a 200%+ rerating.

These setups are rare. But they exist, and waiting for them is the entire game.

The Rabbit vs. The Hunter

I’ve written before about the Rabbit vs. Hunter framework.

It describes two instinctive responses to drawdowns.

The Rabbit freezes. It sits paralyzed, staring at the red on the screen, doing nothing.
The Hunter assesses conditions and, if the thesis is intact, adds to the position.

Sun Tzu would recognize this immediately. He writes extensively about emotional discipline. About understanding your own psychological state. About not reacting to conditions, but instead shaping them.

The problem is that the Rabbit response feels rational in the moment. The stock is down 15%.

The market is telling you something. Maybe you should wait for clarity. But waiting for clarity is often just a euphemism for doing nothing while the asymmetry improves in front of you.

The Rabbit watches the price fall further, never adding, and eventually the thesis plays out without them having capitalized on the dislocation.

The Hunter knows this.

The Hunter has done the work beforehand. The Hunter has a thesis with clearly defined assumptions and kill criteria.

When the stock drops, the Hunter checks the kill criteria. If none have been triggered, the drawdown is information about the market, not information about the business.

And information about the market, for a long-term investor, is useful only insofar as it lets you buy more of something you already liked at a lower price.

Sun Tzu would say: “Know yourself, know your enemy.” In investing, “knowing yourself” means understanding your own emotional triggers, your tendency to freeze, your susceptibility to FOMO.

“Knowing your enemy” means understanding the market’s behavioral tendencies: its tendency to overreact, to extrapolate, to misprice duration, to ignore small and illiquid names.

The investor who knows both will rarely be caught off guard.

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Wu Wei: Don’t Be a Great Farmer. Farm in Spring.

Wu Wei is a Daoist concept that roughly translates to “non-action” or “effortless action.” It does not mean doing nothing. It means aligning yourself with the natural flow of events rather than fighting against them.

There’s a line attributed to one of the Daoist philosophers that I think about often:

“It’s great to be a good farmer, but you don’t have to be a great farmer in the spring.”

In spring, the conditions do the heavy lifting. You just have to show up and plant.

Investing is the same.

There are periods where the conditions are doing the work for you: regulatory tailwinds, industry transitions, valuation dislocations, forced selling. In these periods, you do not need to be a genius stock picker.

You just need to be present and positioned.

Conversely, there are periods where conditions are hostile: everything is expensive, speculative fervor is peaking, and the easy money has been made. In these periods, even excellent stock picking may not save you.

Wu Wei says: flow with events, do not fight them.

This is counterintuitive for contrarian investors.

Part of what we do is bet against the crowd. But there is a difference between betting against the crowd on a specific mispriced situation, and fighting the entire direction of the market or the macro environment.

The former is good investing.

The latter is stubbornness disguised as conviction.

I try to find situations where the natural flow of events is working in the company’s favor. A regulatory change that creates a structural tailwind. A recurring revenue transition that the market is not yet pricing. A catalyst with a defined timeline.

These are “spring” conditions.

The thesis is not dependent on the company doing something extraordinary. It is dependent on the company executing on something that is already in motion.

When multiple “spring” conditions converge on a single name, that is what Charlie Munger called the Lollapalooza Effect.

Individual tailwinds add. Convergent tailwinds multiply. And the market, because it tends to think linearly, consistently underprices the multiplicative scenario.

This is my edge.

Coup d’oeil: Seeing What Others Cannot

Coup d’oeil is a French term meaning “stroke of the eye.” It refers to the ability of great military commanders to take in a complex situation, with its many variables and uncertainties, and instantly perceive the correct course of action.

Napoleon was said to have possessed it. Von Clausewitz wrote about it.

In investing, coup d’oeil is the ability to look at a company and see, in an instant, why the market is wrong.

Not because you’re smarter. But because you’ve done the pattern recognition work so many times that the signal cuts through the noise.

This is not mystical.

It is the product of method.

You do the analysis over and over. You study hundreds of situations. You develop an instinct for which factors matter and which are distractions. And then, one day, you look at a company and the thesis assembles itself almost automatically.

The misclassification. The hidden asset. The earnings power that the market is ignoring because it’s fixated on the wrong metric.

I think about this when I write about companies that I think the market has mislabeled.

A company classified as “insurance” that is actually a search fund platform.

A company labeled as “coal” that is actually transitioning into a power utility.

A monitoring business whose earnings are misread because the market is focused on a single quarter rather than the trajectory.

In each case, the thesis is not complicated. It is a simple observation that the label is wrong, and when the label changes, the multiple changes.

The hard part is not the observation. It is having done enough work, on enough situations, to recognize the pattern when it appears.

That is coup d’oeil.

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Victory Without Battle

Sun Tzu’s most famous principle may be that the greatest victory is won without fighting.

The battle, if it comes to that, is already a sign that something went wrong.

The real victory was achieved beforehand, through positioning, preparation, and patience.

For investors, the “battle” is the period after you buy.

The volatility. The drawdowns. The noise. If you have done the work correctly, the battle is already won before you enter the position.

You’ve identified the mispricing. You’ve confirmed the thesis. You’ve sized the position appropriately. You’ve defined your kill criteria.

The outcome will be determined by whether the business executes, not by whether you can stomach the daily price action.

The investors who lose are the ones who enter the battle unprepared.

They buy on a tip, or a chart, or a feeling. They have no thesis and therefore no ability to distinguish between signal and noise. Every drawdown is existential because they have no framework for evaluating it. They are the army that arrived at the battlefield without a plan, and every army that arrives without a plan eventually loses.

Sun Tzu, writing 2,500 years ago, understood all of this. The principles have not changed.

They will not change.

Markets evolve, technology evolves, geopolitics evolve. But the way you win does not. You defend first. You wait for overwhelming odds. You flow with conditions rather than fighting them. You trust your preparation. And you act decisively, and only, when the moment is right.

That is the art of risk taking.

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Thanks for reading.

Dom
Schwar Capital

Q1 2026 Roundup

Schwar Capital Research — Fri, 03 Apr 2026 11:25:27 GMT

To read our full disclaimer, click here.

Happy Easter weekend to everyone celebrating - and happy long weekend to everyone else.

It’s been a busy first quarter over here at Schwar Capital.

We’ve published a lot of work so far this year and wanted to take a moment to pause, look back, and put together a quick roundup of the pieces we think you’ll get the most out of - whether you’re a new subscriber catching up or a day-one reader who wants a second look.

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Here are our favourite posts from Q1 2026:

As always, if you want to read all of these posts in full, you can upgrade to become a paid subscriber here:

Upgrade Now!

We’ve got a strong pipeline of ideas heading into Q2 and we’re excited to share them with you.

As always, thank you for reading, thank you for subscribing, and thank you for the continued support. It means a lot.

Enjoy the weekend.

Dom
Schwar Capital

EPS Up 100%, 2.8x EV/EBITDA, and 4.5x Upside If the Optionality Hits

Schwar Capital Research — Mon, 30 Mar 2026 12:06:04 GMT

To read our full disclaimer, click here.

Spectra Systems published its audited full-year results for 2025 this morning.

The headline: record everything.

Revenue grew 30.7% to $64.3 million.
Adjusted EBITDA surged 82.9% to $27.3 million.
Adjusted EPS doubled to $0.378.
Net income rose 136% to $20.1 million.
Operating profit more than doubled to $24.3 million.

As of writing the stock is up 11% today at 140p. The market cap is approximately £68 million.

Spectra carries $14.8 million in unrestricted cash against $3.3 million of debt. That is a net cash position of approximately £9.1 million, or roughly 13% of the entire market cap. Strip that out and the enterprise value is approximately £59 million.

On trailing numbers, that gives you an EV/EBITDA of 2.8x.

A trailing P/E of 4.2x.

For a business with contracted recurring revenue, 40%+ operating margins, and monopolistic switching costs embedded in central bank infrastructure.

In January, I wrote that the market was valuing Spectra as if the business-model transition had not happened. Three months later, the company has delivered record results across every metric, and the stock is actually lower than when I wrote the thesis.

The valuation gap has widened.

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In the rest of this post, I cover:

The full-year numbers and what they tell us
Segment-by-segment performance
The balance sheet transformation and downside protection
What 2026 actually looks like as sensor revenue rolls off
Bear, base, and bull case valuations
Key developments and what I am watching

March Portfolio Update

Schwar Capital Research — Fri, 27 Mar 2026 17:35:10 GMT

To read our full disclaimer, click here.

The SCR portfolio is up 1.2% year-to-date.

The S&P 500? Down 6.4%.

That’s a nearly 8% spread since the start of the year.

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Concentration in a Down Market

When the market sells off, most investors scramble. They rotate into large caps, buy ETFs, hide in cash.

I did the opposite this week. I added to two existing positions.

I’ve written before about Lee Freeman-Shor’s The Art of Execution and the lessons it holds for managing a concentrated portfolio.

One of the core takeaways is simple: when you have conviction in a business and the price drops, you have to be willing to act.

The investors who underperform aren’t the ones who pick the wrong stocks - they’re the ones who freeze when it matters.

So I didn’t freeze.

I doubled down on two positions that I know well, that I’ve followed closely, and where the thesis remains fully intact. Combined, they now make up roughly 14% of the portfolio.

Letting Positions Earn Their Size

I recently re-read an article by Ian Cassel on MicroCapClub about what high conviction actually means in practice. His framing stuck with me.

Most investors hear “high conviction” and think it means taking a massive initial position.

Cassel argues the opposite: high concentration doesn’t mean sizing big at the start. It means letting winning positions get big over time.

These two positions are earning their size. Both companies have delivered on earnings. Both have management teams I back. And both have seen their share prices fall since I first bought them - which, if the thesis is intact, is an opportunity to add, not a reason to run.

In the past, I’ve made the mistake of going too big too early. I had conviction, but volatility meant I overpaid in hindsight. Large initial weightings left me exposed to drawdowns that were harder to sit through - not because the business was wrong, but because I’d overstepped my conviction relative to where I was in the relationship with the company.

That experience changed how I approach position sizing. I now build into positions gradually, letting my conviction scale with the evidence. It’s me evolving as an investor. I start smaller, add as the business proves itself, and let the weighting grow over time rather than front-loading the bet.

That’s exactly what’s happening here.

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A Small Addition

On a separate note, I also added a small lottery-type position this week - an idea I came across via Real Economy Ideas.

It’s sized accordingly. As Cassel points out, high conviction doesn’t look the same in every situation. A story stock or speculative position warrants a much smaller allocation than a proven compounder, because the risk profile is fundamentally different. You can have conviction in an idea while still expressing it through disciplined sizing.

The position is tiny. The asymmetry is what makes it interesting.

The Bigger Picture

The fact that this concentrated micro-cap portfolio is outperforming the wider benchmark this year is encouraging. I think it reflects the asymmetry built into a lot of the current positions - businesses that are misunderstood, undervalued, or simply too small for most institutional investors to care about.

That’s the edge. And markets like this are where it shows up.

I’m not celebrating a quarters performance. But I am paying attention to what it tells me about the portfolio’s construction and where the risk-reward sits today.

So far this year, the process is working.

In the rest of this post, I’ll cover the positions I added to, the new weightings for all positions in the portfolio, and a move I’m planning to make next week.

New Position: Lottery Ticket With 12x Upside Potential

Schwar Capital Research — Wed, 25 Mar 2026 12:06:32 GMT

To read our full disclaimer, click here.

This is a little different from what we usually cover.

I came across a special situation that I think is worth flagging - not as a core position, but as a small, asymmetric lottery ticket. I’m sizing it at roughly 1% of the portfolio. If it works, great. If it doesn’t, the damage is negligible.

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Here’s the quick version.

There’s an oil and gas producer trading at an $85 million market cap that generates roughly $250 million a year in EBITDA and sits on over $1 billion in proved reserves.

The stock has lost 85% of its value - not because the wells stopped producing, but because the previous management team structured a financing deal so badly that it’s on the verge of triggering massive dilution.

Those executives are now gone. A new CEO with a serious track record has stepped in. And there’s a single deadline - tomorrow, March 26 - that determines whether the toxic overhang gets resolved or the dilution gets worse.

If the refinancing works, the stock could re-rate 7x to 12x from current levels based on what the company actually earns and owns. If it doesn’t, the downside is real - but even under full dilution, the per-share asset value still appears to sit above where the stock trades today.

That’s the asymmetry. A 1% position where the downside is capped and the upside, if things break right, is multiples of the current price.

Two Companies I Think The Market Is Mispricing (AT.L, PPIH)

Schwar Capital Research — Mon, 23 Mar 2026 15:00:51 GMT

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On the surface, Ashtead Technology (AT.L) and Perma-Pipe International (PPIH) look like very different businesses.

One rents subsea equipment to offshore energy contractors. The other manufactures pre-insulated piping systems for oil & gas, district energy, and increasingly, data center cooling.

But they share a common thread: both are infrastructure picks-and-shovels plays sitting at the intersection of energy security and industrial buildout, and both are being undervalued by a market that’s fixated on the wrong risks.

Ashtead just delivered full-year results that beat expectations. Perma-Pipe announced a strategic expansion into AI data center infrastructure while growing revenue 37% year-to-date.

Let’s start with the numbers.

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Part 1: Ashtead Technology - FY25 Full-Year Results (AT.L)

Ashtead Technology released its full-year results on 17 March.

The headline: adjusted EPS came in at 49.4p - 10% ahead of the 44.7p consensus I referenced in our January update. Margins hit the top end of management’s target range. The balance sheet strengthened materially. And the backlog picture is the strongest it’s ever been.

At 403p, the stock trades at roughly 8x trailing earnings.

For a business that has compounded adjusted EPS at a 37% CAGR since 2022, that multiple feels mispriced to me.

The Numbers

Full-year revenue came in at £203.2 million, up 21% year-on-year. The breakdown: 19% from the Seatronics and J2 Subsea acquisitions completed in late 2024, 3% organic, and a 1% FX headwind.

Management deliberately trimmed lower-margin activities inherited from the acquisitions, prioritising earnings quality over top-line vanity.

The result: Adjusted EBITA of £59.1 million, up 17.5% year-on-year, with a 29.1% margin - towards the top end of management’s medium-term target range. That beat the £57.7m consensus expectation.

Adjusted EPS of 49.4p was up 10% on the prior year. Statutory diluted EPS hit 39.6p, up 12%.

ROIC came in at 22.7% - down from 24.3% last year due to the acquisition mix, but still well above cost of capital.

Cash generation was strong. Cash inflow from operations was £73.2 million (2024: £46.5m). After capex of £37.2m, free cash flow was £40.4m, representing an EBITDA-to-free-cash-flow conversion ratio of roughly 49%.

Leverage dropped to 1.3x net debt to EBITDA at year-end, down from 1.6x proforma at the start of the year. Net debt fell to £108.9m from £128.4m.

The dividend increased 8% to 1.3p per share. The Board acknowledged potential for share buybacks alongside continued M&A, noting buybacks are a lower priority given the growth opportunities ahead.

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In the rest of this post, I discuss:

What the Ashtead earnings call revealed about backlog visibility and the M&A flywheel
Why the Middle East situation is actually a tailwind for Ashtead, not a headwind
Perma-Pipe’s strategic pivot into AI data center infrastructure
Why both companies sit on the right side of the same structural trends
Updated valuation and positioning

TruFin Final Results: Every Line Beat, the Operating Leverage Is Real (TRU.L)

Schwar Capital Research — Fri, 20 Mar 2026 12:33:36 GMT

To read our full disclaimer, click here.

TruFin published its audited final results for 2025 on Wednesday morning.

The headline: every key financial metric beat even the already-upgraded preliminary numbers from January. Revenue grew 20% to £65.9 million, adjusted EBITDA surged 66% to £12.6 million, and adjusted PBT came in at £8.4 million - up 848% year-on-year. That’s not a typo.

The stock is trading around £1.20, roughly flat since our last update. The market cap sits at approximately £117 million.

I think the market is still missing the story.

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The Numbers vs. Our January Estimates

The January 15th trading update gave us preliminary figures. Here’s how the audited results compare:

Group revenue: ~£63m estimated → £65.9m actual (beat)
Adjusted EBITDA: >£11.8m estimated → £12.6m actual (beat)
Adjusted PBT: >£7.4m estimated → £8.4m actual (beat by 13.5%)
Year-end cash: >£12m estimated → £12.4m actual (in line)

Every number came in ahead. Adjusted EBIT - the metric that strips out capitalised development costs and shows true operating profitability - increased 699% year-on-year. That’s the operating leverage we’ve been waiting for.

Reported profit before tax was £7.6 million, up from essentially zero (£15,000) in 2024. After a £3.9 million tax credit - largely from recognising deferred tax assets against the group’s £79 million of carried-forward tax losses - profit for the year was £11.5 million. Basic EPS came in at 11.3p, up from 4.6p.

At £1.20, the stock trades on approximately 10x adjusted earnings. For a group growing revenue 20% and EBITDA 66%. With a debt-free balance sheet.

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In the rest of this post, I discuss:

How each subsidiary performed against expectations
The balance sheet transformation
The underappreciated £79 million tax shield
Why Satago might be inflecting
Updated base and bull case valuations
What I’m watching from here

My Top 8 Highest Conviction Micro Cap Ideas

Schwar Capital Research — Mon, 16 Mar 2026 12:25:24 GMT

To read our full disclaimer, click here.

Schwar Capital just hit 8,000 subscribers and we’re closing in on Substack Bestseller status.

That’s thanks to all of you.

The paid subscribers, the free readers who share the posts, and the growing community of long-term, patient investors who’ve joined over the past year and a bit.

To celebrate, I’m giving a 25% discount on the annual plan for the first 5 people who use this link:

Get 25% Off - Limited to 5 Subscribers

That means you get full access to every one of these ideas in detail, ongoing coverage of all the companies below, plus every new idea we publish going forward.

Since launching Schwar Capital, we’ve covered companies across the UK, US, Canada, Sweden, Germany, and Australia.

Some of these have already started delivering. Others are early in their story, still proving out the thesis.

That’s the nature of this approach - patient capital, applied to asymmetric situations, held with conviction.

Below is a short thesis summary for every high-conviction micro cap position in the portfolio. Each one links to the full deep dive or most recent earnings summary for those who want the complete picture.

I hope you enjoy today’s post.

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Ashtead Technology Holdings (LSE: AT)

A subsea equipment rental business operating since 1985 with zero loss-making years in four decades. Ashtead rents 30,000+ pieces of mission-critical equipment to the world’s largest offshore contractors - gear that costs a fraction of total project spend but can shut down a vessel operation costing hundreds of thousands per day if it fails. The company has completed 9 acquisitions, all subject to 20% IRR hurdles, in a deeply fragmented market with plenty of targets remaining. FY2025 revenue came in at £203 million, up 21% year-over-year, with margins at the top end of guidance. The business delivers roughly 25% returns on invested capital. I also believe there’s optionality the market isn’t pricing in.

Acorn Energy (OTC: ACFN)

Through its 99%-owned subsidiary OmniMetrix, Acorn monitors critical backup power infrastructure for hospitals, cell towers, and gas utilities - over 23,000 connected devices watching over billions of dollars of equipment. The business runs a razor-and-blade model with recurring monitoring subscriptions at 95% gross margins. CEO Jan Loeb owns 17% of the company. Monitoring revenue grew 22% year-over-year while overall margins hit a record 77% and cash from operations more than doubled. Zero debt. Management guiding for 20%+ annual revenue growth over the next 3-5 years. A recent exclusive partnership dramatically expands the addressable market into several new verticals - with average deal sizes 5-6x larger than the existing business. In my opinion, the most recent earnings report was better than the headline suggests.

Spectra Systems (LSE: SPSY)

A UK-listed, US-headquartered company that embeds covert authentication materials into banknotes and manufactures the sensor systems that detect them. Once a central bank integrates these materials into a currency design, they’re locked in for the entire note series - typically 10-15 years. The business has undergone a fundamental transformation from lumpy project revenue to contracted recurring income, with a signed maintenance agreement running through 2030 now on the books. H1 2025 revenue grew 54%, adjusted EBITDA more than doubled, and the board expects record earnings for the full year. Multiple layers of optionality sit on top of the base case - none of which are required for the thesis to work. I believe the base case alone supports significant upside from here.

Perma-Pipe International Holdings (NASDAQ: PPIH)

A 32-year-old manufacturer of pre-insulated piping and leak detection systems operating 14 facilities across 6 countries. I originally added this as a Middle East infrastructure play after the company secured a key approval that opened access to a massive new market. Contracts started flowing immediately. Then a second growth vector emerged that I didn’t expect to materialise this quickly - one tied to a secular theme that has nothing to do with oil. Two catalysts are now firing simultaneously. The contracted backlog is substantial relative to the company’s size, against a fortress balance sheet. Management has publicly stated the stock “does not reflect the true value of the company.”

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TruFin (LSE: TRU)

A UK-listed holding company with three distinct assets that, individually, would likely command higher multiples than the market gives the group today. Adjusted PBT surged 720% year-over-year. One division is quietly compounding with 100% client retention and deep switching costs. Another is shifting from hit-driven to recurring revenue, with back-catalogue expected to account for roughly 50% of 2026 revenues. Management has been aggressively returning capital to shareholders through buybacks. A recently established incentive plan ties key management compensation to a specific exit valuation, signalling that value crystallisation is actively being contemplated. The sum-of-the-parts tells an interesting story.

Kingsway Financial Services (NYSE: KFS)

The only publicly traded company in the United States operating the search fund model at scale - an asset class that has delivered approximately 32% IRRs over four decades according to Stanford data. Kingsway backs entrepreneurial CEOs to acquire and grow recurring-revenue service businesses. Management owns 27% and has invested $11 million of personal capital. The growth engine delivered revenue up 59% year-over-year in 2025, with Q4 accelerating further. Quarterly EBITDA improved sequentially every single quarter throughout the year. Six acquisitions closed in 2025, with 3-5 targeted for 2026. A $330 million net operating loss portfolio means most earnings pass through tax-free for years. There is a significant gap between reported GAAP earnings and underlying economic earning power - a gap I expect to narrow meaningfully as recently acquired businesses exit their investment phases.

CeoTronics (FSE: CEK)

A 40-year-old German manufacturer of professional communication systems for military, police, fire, and aviation - environments where communication failure can cost lives. The company designs and manufactures roughly 94% of components in-house in Germany. Over two-thirds of revenue now comes from recurring service relationships. Recent results were exceptional: record revenue, EBIT nearly quadrupled, and the largest single order in company history - pushing the order backlog to a level that covers a significant portion of the entire market cap. The balance sheet is a fortress with zero meaningful debt. Europe’s defence modernisation cycle provides a structural tailwind spanning 10-15 years, and the company’s proprietary platform enables interoperability across mixed communication networks - exactly what NATO forces need as they modernise.

Rumbu Holdings (TSXV: RMB)

A Canadian micro-cap building a funeral home platform through disciplined acquisitions across Western Canada. The industry has zero cyclicality - demand is entirely non-discretionary, driven by an aging population with annual deaths projected to rise for the next two decades. Gross margins run 70-75%. The company has grown revenue 7x in two years, acquiring family-owned funeral homes from aging operators with no succession plan at attractive multiples. Insiders own approximately 62%, and the founders have over 35 years of combined experience in the industry. Management has identified a deep pipeline of additional targets and plans to accelerate the acquisition pace. Almost nobody is watching this. It is an early-stage show-me story with a clear path to scale in one of the most fragmented and stable industries in existence.

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Thanks for reading and have a great rest of your day,

Dom
Schwar Capital

KFS Q4 2025: The J-Curve Is Turning

Schwar Capital Research — Fri, 13 Mar 2026 13:57:48 GMT

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Kingsway just reported Q4 and full year 2025 earnings. The headline numbers:

Full-year revenue of $135.0 million, up 23% year-on-year
KSX revenue of $64.2 million, up 59% year-on-year
Q4 KSX revenue of $20.3 million, up 64% year-on-year
Full-year consolidated adjusted EBITDA of $7.8 million, down from $11.0 million
Portfolio LTM EBITDA of $22.0 to $23.0 million
Six acquisitions completed in 2025, with 3 to 5 targeted for 2026
Double-digit organic growth budgeted for both segments in 2026

Investors scanning the numbers quickly will see one thing: adjusted EBITDA fell 29% year-on-year. Net loss widened from $8.3 million to $10.3 million. That looks like deterioration.

In my opinion, it’s not. It is the J-curve doing exactly what the thesis predicted it would do. And there is now real, granular evidence that it is beginning to turn.

The following is my personal take and what I am doing with my position.

15 Microcap Ideas on My Watchlist

Schwar Capital Research — Mon, 09 Mar 2026 15:03:28 GMT

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Every so often I like to step back from the deep dives and share a broader sweep of what I’m watching.

These are 15 microcap (and near-microcap) names that have caught my attention.

None of these are full positions -they’re watchlist names at various stages of diligence.

The common thread: real businesses, identifiable catalysts, and some reason the market isn’t paying attention yet.

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Cybeats Technology (CYBT.CN)

Cybeats is a pure-play on Software Bill of Materials (SBOM) regulations, which are rapidly becoming mandatory for any company selling software to the U.S. government or defense sector. Their SBOM Studio platform lets enterprises produce, manage, and act on SBOMs -and they’re the sole provider of an enterprise-grade platform in this niche. Revenue is growing 50%+ YoY with contracts from names like Schneider Electric and U.S. government agencies. As compliance requirements spread from defense into broader enterprise, Cybeats sits at the chokepoint. This is a regulatory-driven TAM expansion story with high operating leverage as renewals compound. Still tiny, still early, and still largely unknown.

Cloudastructure (CSAI)

Cloudastructure has built an AI platform that monitors live video surveillance cameras and sends real-time alerts to operations teams. They serve the multi-family sector and are growing fast. There’s some historical baggage here -the founder was convicted in a stock promotion scheme, was fired, and has been dumping shares since, which keeps the price depressed. But the underlying business is real and scaling. At a ~$43m fully diluted market cap, it’s worth noting that a private competitor, Spot AI, recently raised at a $100m valuation. If the overhang from the founder’s selling eventually clears, the gap between private and public market valuations could close quickly.

TAT Technologies (TATT)

Commercial aviation is entering a prolonged MRO supercycle. Fleets are aging globally, new aircraft deliveries are delayed, and airlines have no choice but to maintain what they’ve got. TAT provides heat exchangers, APUs, and landing gear MRO - the unsexy but essential plumbing of aircraft maintenance. Q3 2025 revenue grew 14% YoY to $46m, with gross margins at 25% and expanding. They’ve now delivered nine consecutive quarters of revenue growth and sit on a $524m backlog. Multiple analysts have raised targets north of $55. With Q4 results expected in late March and management explicitly exploring accretive acquisitions, this looks like a compounder hiding in plain sight.

Ascent Industries (ACNT)

This is a textbook turnaround. Ascent sold off its legacy tubular divisions for ~$61m, emerged debt-free with $58m in cash, and is now executing as a pure-play specialty chemicals platform. Q3 2025 was the proof point: gross profit nearly doubled, gross margin expanded over 1,500 basis points to ~30%, and adjusted EBITDA turned positive. They’ve repurchased 7.2% of shares outstanding and authorized a new buyback through 2027. A new contract is expected to generate over $10m in incremental annualized revenue. When a company goes from messy conglomerate to focused, debt-free, and buying back stock -that’s the kind of inflection that gets re-rated.

WidePoint (WYY)

The numbers here are almost comically asymmetric. WidePoint has 10 million shares outstanding, no bank debt, $12m in cash, and a $269m contract backlog. They are awaiting award of the DGS CWMS 3.0 - a $3 billion, 10-year government contract vehicle - against a $51m market cap. The award is expected by end of Q1 or early Q2 2026. If it comes through, the stock is wildly mispriced. If it doesn’t, the existing backlog still underpins significant value. This is an event-driven setup where the market seems to be assigning near-zero probability to a transformative outcome.

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SANUWAVE Health (SNWV)

SANUWAVE dominates a niche in wound care with its UltraMIST Therapy System - a painless, non-contact ultrasound device. The model is high-margin razor/razor-blade: 60% of revenue is recurring. Under CEO Morgan Frank, the company executed a major turnaround, recruiting elite sales leadership from Abiomed. 2025 saw some industry headwinds around skin-substitute reimbursements, but SANUWAVE is positioned for a 2026 tailwind as wound -care distributors seek alternative revenue streams. Projected 30% growth with improving EBITDA and significant operating leverage as the commercial team scales. A real business with real recurring revenue at a microcap price.

Cematrix (CEMX)

Cematrix has been around for years and still trades under $1, but it’s profitable, about to report a record year for 2025, and its backlog keeps growing even as revenues rise - pointing to another record year in 2026. The company is essentially a monopoly in its niche of cellular concrete solutions. Beyond organic growth, it’s now in a position to be an acquirer. The main risk is cyclicality in the construction industry, but the competitive moat here is unusually wide for a sub-$1 stock. Scaling itself out of the bargain basement.

BeWhere Holdings (BEW.V)

BeWhere is a consistently profitable mobile IoT asset-tracking business that’s now pivoting from hardware-focused sales to subscription-based recurring revenue. That transition - from lumpy product sales to predictable SaaS-like streams - is exactly the kind of shift that drives re-ratings in small companies. The company just announced a C$4m brokered LIFE offering, signaling the pivot to wider institutional ownership is underway. At the cusp of going from “unknown microcap” to “institutionally owned compounder.”

Atlas Engineered Products (AEP.V)

AEP is rolling up and automating the manufacturing of wood roof trusses, floor trusses, and wall panels for Canadian residential construction. They’ve been prudent through the housing downturn and are positioned to take market share as building activity recovers. At the current depressed price, even modest signs of a homebuilding recovery could lead to significant appreciation. This is a picks -and-shovels play on Canadian housing with consolidation economics - buy fragmented local manufacturers cheaply, centralize operations, and ride the cycle back up.

NeurAxis (NRXS)

NeurAxis has arguably cleared the hardest part of its journey. The company’s IB-Stim device for pediatric functional abdominal pain has achieved inclusion in the pediatric guidelines, secured a Category 1 CPT reimbursement code, and obtained major insurance coverage. The only real question now is speed of scaling. Notably, the one analyst covering the stock has not included VA revenue in their model -and the VA market opportunity is in the double-digit billions, roughly the same size as the pediatric opportunity. If execution continues, NRXS could be dramatically underestimated by the market simply because no one’s modeling the full TAM.

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Garrett Motion (GTX)

Garrett makes turbochargers and has successfully bridged into higher-tech electric and hybrid products. The company emerged from bankruptcy in 2021 and has been well-run since, consistently producing cash and paying down debt. Low valuation multiples are expanding as the balance sheet de-risks. This isn’t a moonshot -it’s a boring, steady compounder that the market still treats with post-bankruptcy skepticism. As that stigma fades and cash generation continues, the re-rating should follow.

High Tide (HITI)

High Tide is the dominant cannabis retailer in Canada with a 12% national market share and a 2.5-million-member loyalty program called Cabana Club. CEO Raj Grover has built the moat using a “Discount Club Model” that prioritizes volume and customer loyalty over high margins. The company is now expanding internationally - acquiring a majority stake in Germany’s Remexian Pharma to enter the European medical market. Cash-flow positive, scaling, and waiting for U.S. federal rescheduling to unlock the next leg of growth. Trading at a modest EV/EBITDA multiple relative to its projected $700m 2026 revenue, this is a rare cannabis name that actually generates cash.

Koil Energy (KLNG)

Koil provides critical “plumbing” and engineering services for subsea offshore energy infrastructure. Since 2024, CEO Erik Wiik has led a rapid turnaround, converting losses into profits and growing revenue by 40% while competitors contracted. The three-year strategic plan focuses on capturing share in new basins - Brazil, North Sea -without needing oil prices to rise. This is a lean, high-growth play on offshore energy services with geographic expansion as the primary driver. The market hasn’t caught on yet.

NameSilo Technologies (URL.CN)

NameSilo is a domain registrar business that generates recurring cash flow from millions of domain renewals. Think of it as a boring utility for the internet economy. The interesting part is capital allocation: under Paul Andreola - a well-known microcap stock picker - the company is using that cash flow to acquire businesses and build out a mini-platform. Recent acquisitions include SewerVUE (sewer inspection robots) and Reach Systems (vertically integrating engineering and manufacturing). The domain business provides the steady base; acquisitions provide the upside optionality. If management continues to allocate capital intelligently, this is the kind of quiet compounder that looks obvious in hindsight.

Paragon Advanced Labs (PALS.V)

Paragon is a high-growth mining services company specializing in high-speed mineral testing via PhotonAssay technology. This is meaningfully faster and more accurate than traditional fire assay methods, which gives them a real competitive edge as mining activity ramps. Management projects rapid scaling, with 2027 EBITDA expected to hit $19m -a ~110% increase over 2026 estimates. Currently trading at just 6x 2027 EV/EBITDA, compared to slower-growing industry peers at 10-12x. A picks-and-shovels play on the commodities cycle with a disruptive technology edge.

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As always, these are watchlist names.

Several could end up as full write-ups if diligence deepens the thesis. The common denominator is that each has a real business, identifiable catalysts, and a reason the market isn’t fully pricing in the opportunity.

Dom
Schwar Capital

ACFN Q4 2025: Down 15% on Record Margins.

Schwar Capital Research — Fri, 06 Mar 2026 12:32:42 GMT

To read our full disclaimer, click here.

Acorn Energy just reported Q4 2025 earnings. The headline numbers:

Full-year revenue of $11.48 million, up 4.5% year-on-year
Monitoring revenue of $5.56 million, up 22% year-on-year
Gross margin of 77%, up from 73% in 2024
Monitoring gross margin of 95%
Operating income of $1.99 million
Cash from operations more than doubled to $2.09 million
Year-end cash of $4.45 million, zero debt

The stock sold off 15%.

The market looked at 4.5% total revenue growth and hit sell.

Hardware revenue declined 8%, and that dragged the headline number. But the decline is almost entirely mechanical. Deferred hardware revenue amortised at $956,000 in 2025, down 48% from $1.84 million the year prior. That swing alone suppressed the reported figure. Strip it out and new hardware revenues actually grew approximately 8%. Separately, a one-time accounting policy change in Q3 created a temporary monitoring revenue bump that made Q4 look soft by comparison.

Meanwhile monitoring revenue grew 22% at a 95% gross margin. Overall margins expanded. Cash generation more than doubled. And management reaffirmed 20% average annual revenue growth over the next 3 to 5 years, with roughly half of each incremental revenue dollar expected to reach operating income.

The following is my personal take and what I am doing with my position.

My Price Targets For Every Position In The Portfolio

Schwar Capital Research — Mon, 02 Mar 2026 12:23:14 GMT

To read our full disclaimer, click here.

I run a concentrated portfolio of micro and small-cap stocks. Eight positions. Five countries. Four currencies.

These are my personal price targets for every position I own:

I want to emphasise that word: personal.

These are not recommendations. They are not forecasts. They are how I - one investor, running one concentrated portfolio - think about the range of outcomes for the businesses I’ve chosen to own.

I get asked about price targets more than anything else.

Fair question.

But I’ve always resisted publishing a single number because a price target without context is worse than useless.

It creates false precision. It anchors you to a figure without understanding the assumptions behind it.

So instead of one number, I’m giving you three scenarios for every position: bear, base, and bull.

Every assumption visible. Every input transparent. You can disagree with any number and plug in your own.

This is how I actually think about valuation - not as a precise forecast, but as a range of outcomes weighted by probability. I prefer to be roughly right rather than precisely wrong.

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The portfolio is constructed around a few principles that I come back to again and again:

Asymmetric risk/reward. I want to risk 1 to make 3, not the other way around.
Simple thesis, few key drivers. If I need a spreadsheet with 47 tabs to justify the investment, I’m probably fooling myself.
Catalysts matter. Cheap alone isn’t enough. Something needs to change.
These are small, concentrated bets. I own eight stocks, not eighty. That’s a deliberate choice. I’d rather know eight businesses deeply than own forty I half-understand.

In the rest of this post, I walk through every position with the full valuation model - current price, key financials, five-year bear/base/bull scenarios, implied price targets, and why I own each one.