On Patience, Pattern Recognition, and Process
The Schwar Report - Week 22
Ever wonder why the best investors seem so comfortable doing nothing? How they spot opportunities in places others have given up on? Or what separates systematic success from occasional luck? This week, we explore how patience, keen observation, and disciplined process combine to create lasting investment success.
📚 Three Worthwhile Reads
1. "Drawdowns" by Chris Mayer
Why it matters: A masterful examination of how even the best stocks and investors face significant drawdowns.
Key insight: Apple, a 225-bagger from 1980-2012, faced two 80% drawdowns and several 40% drops.
From my desk: The visual presentation of drawdowns in successful companies like Brown & Brown makes this lesson impossible to ignore.
2. "A Few Micro-caps I'm Looking At" by
Why it matters: A compelling analysis of how inflection points in small companies can create asymmetric opportunities.
Key insight: The best opportunities often come when a company transitions from "loser" to "grower".
From my desk: The IZEA case study shows how balance sheet strength can provide optionality during business transitions.
3. "The Score Takes Care of Itself" by Bill Walsh
Why it matters: Walsh's philosophy on process over outcomes perfectly mirrors successful investing.
Key insight: Excellence comes from mastering the fundamentals and trusting your system through adversity.
From my desk: The parallels between building a championship team and building a lasting portfolio are striking.
💠Two Quotes Worth Considering
1. On Decision Making:
"The real key to making money in stocks is not to get scared out of them." — Peter Lynch
Why it matters: As Mayer's article shows, even the most successful investors faced multiple 20%+ drawdowns. The ability to stay invested through these periods is what separates great investors from good ones.
2. On Intelligent Risk-Taking:
"When I see a stock crap out and the share price remain flattish for some time despite whatever news the company puts out – I'm interested." —
Real-world application: The market's inability to recognize fundamental changes creates opportunities for patient investors who can spot real inflection points.
🤔 One Question to Consider
What's your process for distinguishing between temporary drawdowns and permanent capital impairment?
Context: The difference between the two often determines long-term investment success.
Now you’ve done the poll, why don’t you like this post as well? It helps know you enjoy this content. Thanks!
My thoughts: The best approach combines fundamental analysis. When strong businesses face temporary setbacks, great investors add to their positions instead of panicking.
🎯 Quick Updates
What's New
Latest Portfolio Update:
ICYMI:
![[FREE] Greggs Investment Thesis Statement](https://substackcdn.com/image/fetch/w_140,h_140,c_fill,f_webp,q_auto:good,fl_progressive:steep,g_auto/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff5f16c26-71a2-4e80-bb75-d6634fe1fadb_500x500.png)
Visual of the Week
Companies on My Radar
PayPal (PYPL): Currently writing a more concise and updated investment thesis statement, coming out next week.
BAE Systems (BA.L): Conducting further research into BAE’s critical success factors, specifically in their operations.
Computer Modelling Group (CMG): Nothing catches our attention quite like quality businesses on sale. Looking into this business.
Currently Reading
"Influence" by Robert Cialdini - Reading this classic on the psychology of persuasion and decision-making.
Dom
Founder & Chief Investment Officer
Schwar Capital
P.S. If you found value in these ideas, consider sharing this newsletter with other thoughtful investors. The best asymmetric opportunity might be the compound effect of growing this community together.
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.