The Schwar Report - Issue 3
Monday 2nd September 2024
Welcome to this weeks edition of The Schwar Report, your weekly primer featuring three interesting reads, two thought-provoking quotes, and one actionable step to start your week on the right foot.
Three Reads to Inspire Your Week
“The Ten Commandments for Business Failure” by Donald R. Keough
Why read it: This book flips the script on traditional success manuals by focusing on the key mistakes that lead businesses to fail. By studying the reasons behind business failures, you gain a deeper understanding of what to look out for and avoid, allowing for more informed decision-making and better risk assessment in your investments. As Charlie Munger often advises, inverting your thinking—understanding what not to do—is crucial.
“The Ellsberg Paradox: Can Uncertain Investments Be Your Safest Bet?” by
Why read it: This article provides an insightful analysis of the Ellsberg Paradox and its implications for investment strategies in uncertain markets. By exploring this paradox, the article sheds light on how people tend to prefer known risks over unknown risks, even when the odds may be favourable. This piece is a must-read for those interested in behavioural economics and decision theory, providing valuable insights into how uncertainty impacts our choices in both everyday life and investing.
“The Walt Disney Company - Part 1” by
Why read it: This newsletter offers an in-depth analysis of The Walt Disney Company and its recent developments. It highlights Disney's strategic moves, financial performance, and the challenges it faces in the evolving entertainment industry. This analysis is excellent for investors looking to gain a further understanding on Disney and the dynamics influencing the companies future.
Two Quotes to Reflect On
"The strategy we've adopted precludes our following standard diversification dogma. Many pundits would therefore say the strategy must be riskier than that employed by more conventional investors. We disagree. We believe that a policy of portfolio concentration may well decrease risk if it raises, as it should, both the intensity with which an investor thinks about a business and the comfort-level he must feel with its economic characteristics before buying into it.”
— Warren Buffett
Reflection: This quote challenges the conventional wisdom that extensive diversification always reduces risk. Buffett suggests that focusing your investments on a select number of well-understood businesses can actually lower risk by allowing for deeper analysis and greater confidence in each investment decision. Concentrated investing encourages thorough research and a stronger connection to the fundamental qualities of each company in your portfolio. For more on concentrated investing, check out our recent post:"Worrying about near-term volatility has nothing to do with being a successful value investor."
— Joel Greenblatt
Reflection: Greenblatt reminds us that short-term market fluctuations should not distract from the core principles of value investing. Success comes from identifying and holding undervalued assets over the long term, regardless of temporary ups and downs. By maintaining focus on the intrinsic value of your investments, you can make more rational decisions and avoid the pitfalls of reactive trading based on market noise.
One Action Step: Evaluate Your Risk-Taking Approach
This week, take a step back to assess whether your investment strategy is too conservative or too aggressive. Are you missing opportunities by playing it too safe, or are you exposing yourself to unnecessary risks? Adjust your approach to find a balance that aligns with your long-term goals.
Quick Tip
Create a "risk/reward" matrix for your portfolio. For each investment, evaluate the potential upside against the downside risks. This will help you visualise whether your current holdings are appropriately balanced and where you might need to adjust your strategy to optimise for growth while managing risk.
On a side note, if you haven’t already, check out or recent report on Evolution AB!
![[FREE] Evolution AB (EVO.ST) Equity Research Report](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%2F4563cd74-03c3-4c89-b5ee-f7047e980201_700x700.png)
That’s it for this week’s Schwar Report. We’re here to help you stay informed, grounded, and focused on your long-term success.
Have a productive week,
The S.C. Team
Disclaimer: The content provided in this newsletter is for informational purposes only and does not constitute financial, investment, or other professional advice. While we believe the information to be reliable, we cannot guarantee its accuracy. The opinions expressed 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.