The Schwar Report - Issue 6
Monday 23rd 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
"Same as Ever: A Guide to What Never Changes" by Morgan Housel
Why read it: Housel presents a master class on optimising risk, seizing opportunity, and living your best life. Through stories and examples, he shows how we can use our grasp of the unchanging to see around corners, not by predicting an uncertain future, but by focusing on what is permanently true.
"Understanding Return on Invested Capital" by
Why read it: his article provides a deep dive into Return on Invested Capital (ROIC), a crucial metric for evaluating a company's profitability and efficiency. It explains how ROIC is calculated, its importance in assessing a company's competitive advantage, and how it can be used to identify potentially undervalued stocks
“Safe-Haven Stocks: Finding Firms that Flourish During Recessions” by
Why read it: This article offers valuable insights into identifying and investing in "safe haven" stocks - companies that can weather economic storms and even thrive during turbulent times. An excellent read!
Two Quotes to Reflect On
"Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven't found it yet, keep looking. Don't settle."
— Steve JobsReflection: Jobs emphasises the importance of passion and purpose in one's career. This quote encourages us to pursue work that we find meaningful and fulfilling, rather than settling for a job that doesn't inspire us.
"The inability to predict outliers implies the inability to predict the course of history."
— Nassim Nicholas Taleb
Reflection: This quote reflects Taleb's philosophy on randomness and unpredictability in complex systems. It suggests that major historical events are often shaped by rare, unexpected occurrences (which he calls "Black Swans") that are inherently unpredictable. This idea emphasizes the importance of building robust systems and strategies that can withstand unforeseen shocks, rather than trying to predict every possible outcome.
One Action Step: Analyse ROIC for Your Portfolio
This week, challenge yourself to calculate and/or analyse the Return on Invested Capital (ROIC) for your holdings. Compare the ROIC of your holdings to their industry averages and historical trends and reflect on how this metric might influence your investment decisions going forward. At the end of the week, review how incorporating ROIC analysis has impacted your understanding of your portfolio and overall investment strategy.
Quick Tip: Use the formula ROIC = NOPAT / Invested Capital, where NOPAT is Net Operating Profit After Tax and Invested Capital is the total amount of money invested in the business.
That's it for this week's Schwar Report. As always, 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.
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