SWOT Analysis

If you've ever listened to Warren Buffett talk about investing, you've heard him mention the idea of a company's moat. The moat is a simple way of describing a company's competitive advantage. A strong competitive advantage, or a wide moat, gives a company sustainability, which, as investors, we're highly interested in.

In this article, we review a popular tool for evaluating competitive advantage, called SWOT analysis. SWOT analysis should be done on every company we're thinking of making an investment in.

SWOT stands for:

Strengths


Weaknesses


Opportunities


Threats

Analyzing these four factors will help you make better investment decisions. It's a brainstorming exercise, so take your time. A good SWOT analysis takes effort, but the more you put into SWOT analysis the better you will understand the company. Let's look at each factor in turn.

Strengths

First, we look at the company's strengths. What does the company do well? What makes it better than others? What does the company have, or do, that sets it apart from its competition?

These are important questions, and should include aspects of the company that made you consider it for investment in the first place. Look at branding, image, pricing power, size, market share, financial position (balance sheet strength), etc.

Here are some strengths to look for:

  • The size of the company relative to others in the industry

  • Balance Sheet strength

  • Cash flows

  • Perception of the company's products

  • Perception of the company's brand(s)

  • What advantages the company has over its competitors

  • In general, what does the company do well?

Weaknesses

Now that you've determined how wonderful the company is, it's time to look for the weaknesses. The same questions should be asked when looking for weaknesses. What does the company do poorly, or not so well? What are other companies doing better? What is keeping the company from greater success.

It's important that you don't gloss over this section. SWOT analysis is a brainstorming effort, so don't discount anything that comes to mind. If you perceive a weakness, list it. The weakness you fail to list today could be why your investment turns out poorly next year.

Some weaknesses to look for:

  • Deteriorating balance sheet

  • Poor perception of company's brand(s) and/or products

  • Advantages other company's have?

  • Lack of management or other employee talent

  • In general, what does the company do poorly?

Opportunities

We shift our focus to external factors when we look at opportunities. Here we try to identify areas of business we think the company is looking to enter, or should be looking to enter. We also look for opportunities to gain market share from competitors, or grow the company's market to new customers.

But there are more than just external opportunities. There are opportunities within a company that should be considered. Can the company combine product lines to increase sales? Maybe the company has duplicate costs that can be streamlined. Companies can always find ways to do things better.

Some opportunities to look for:

  • New markets for products

  • Financial or legal trouble for competitors

  • New technologies the company could adopt

  • Changes in regulatory / tax burdens

  • Strategic investments

  • Internal efficiencies

Threats

Finally, we need to consider threats to the company. Again, threats can be internal as well as external. In fact, I've found that internal threats usually come first, which opens the door to external threats. Therefore, it's important to do a good threat analysis.

Internal threats aren't usually classified as such, which I think is a mistake. Any internal problem is a threat to the company's well-being and should be evaluated alongside the external threats. For example, a company that relies on developing innovative products, such as Microsoft or Intel, faces the threat of losing engineering talent every day. This is an internal threat that could easily pave the way for external threats.

Some possible threats are:

  • Internal obstacles the company is facing.

  • Financial constraints on the company.

  • Cash flow problems.

  • The relative position of the company's largest competitors.

  • Technological advances in the industry (if the company isn't keeping pace).

  • New technologies that threaten to displace the company's products.

SWOT analysis is a brainstorming activity, and you should learn from it. Focus on the weaknesses and the threats when doing SWOT, because that's what will turn around and bite you after you make your investment. I'm not saying you should look only for the negatives, and ignore the company's potential. But you should analyze the risks with as much, or more, scrutiny then the opportunities. Opportunities don't always show up, but somehow risks always do.

About The Author

Chris Mallon is the editor and publisher of the Undervalued Weekly, a financial analysis newsletter. Chris holds a Master of Science in Finance and is the leading analyst for the Dynamic Investors partnership. He is available at chrismallon@dynamicinvestors.net or the through the website at chrismallon@dynamicinvestors.net.

Barrington South Lincoln Stretch rentals .. Lockport Chicago limo O’Hare
In The News:

A newly discovered security flaw with your iPhone or iPad could leave your personal information vulnerable to hackers. Kurt the CyberGuy explains.
Modeled after a traditional bell-shaped skirt worn by women in Kosovo, a theater's roof is draped entirely by solar panels to generate renewable energy on-site.
Kurt the CyberGuy explains how to protect yourself from malicious Chrome extensions that can steal sensitive information like password managers, crypto wallets and banking apps.
Stellantis' innovative STLA AutoDrive 1.0 system allows drivers to safely take their eyes off the road and their hands off the steering wheel.
Here are some travel hacks to save money on your next vacation including setting up price alerts, remaining flexible and checking for 24-hour price drops.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
One report claims at least 25 million people were targeted by infostealer malware between the beginning of 2023 and the end of 2024, capturing bank card details and passwords.
The LaserWeeder G2 uses lasers, artificial intelligence and advanced robotics to offer an alternative to chemicals traditionally used in farming.
Tech expert Kurt “CyberGuy" Knutsson says a malware app called SpyLend is posing as a financial tool, hitting 100,000-plus downloads.
Tech expert Kurt “CyberGuy" Knutsson says Clone Robotics’ Protoclone mimics humans with 1,000 muscles – too human for comfort.
Tech expert Kurt “CyberGuy" Knutsson urges you to use Apple’s App Privacy Report to see what your apps are really up to.
Tech expert Kurt “CyberGuy" Knutsson talks about how to smoothly transfer your data from an old laptop to a new one using cloud storage or external drives.
Kurt the CyberGuy offers tips to safeguard your personal information as scammers become more sophisticated with scam texts and other methods.
WeRide's unmanned electric delivery van, the Robovan W5, has 194 cubic feet of cargo space and can carry payloads up to about 2,205 pounds
Kurt the CyberGuy recommends deleting 16 browser extensions immediately in response to a report saying more than 3.2 million web users were affected by a security breach.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
A robotics firm in China claims a robot has performed the world's first humanoid robot front flip, which is significantly more difficult than a backflip.
A digital ID may be even more secure than a physical ID. Storing your driver's license in your Apple Wallet is an ideal solution for commuters.
A cybersecurity firm has shed some light on just how common tax scams have become. Kurt the CyberGuy offers his advice for how to protect your refund.
Lifesize Plans offers immersive walk-throughs that allow customers the opportunity to tour a home's design before construction actually begins.
Stay up to date on the latest AI technology advancements and learn about the challenges and opportunities AI presents now and for the future.
A man invested $4 million in bitcoin and lost it all with a single click when he was targeted by a vishing scam, which uses phone calls to trick people.
Expandable's Touchdown is a designer trailer that promises a luxury off-grid living experience and unfolds into a home in about 15 minutes.
Major employee screening company data breach affects 3.3 million people. Tech expert Kurt “CyberGuy" Knutsson explains what happened and gives five ways to protect your data.
Kurt “CyberGuy" Knutsson reveals mind-blowing tech that gives you sunlight on demand.

How Copying the HBO Schedule Can Boost Your Business

I'm not talking about posting the HBO schedule on your... Read More

Planning for Success

Business planning is widely acknowledged as one of the keys... Read More

City of Cortez and South Western Colorado Market Survey

We have been spending many hours surveying the market for... Read More

Business Strategy Planning Made Easy

Ask Yourself three simple questions that affect your strategy planning...... Read More

3 Undercover Ways to Make Big Profits from Your Competition

You have heard that there is extra money on the... Read More

Insurance Requirements in Franchised Companies

Franchised companies often require what some believe to be excessive... Read More

Why 9 in 10 Businesses are Overspending on Day-to-day Expenses

Experts estimate that 90 percent of Australian businesses are overspending... Read More

19 Questions to Supercharge Your Business Plan

Whether you are seeking capital for your company or are... Read More

Why You Need a Business Planning System NOT a Business Plan

When someone mentions business planning we have been conditioned to... Read More

The Impact of Price Popularity on Profits

The goal of almost every business owner is to generate... Read More

Don?t Allow Yourself to Get Burned

I am not a big fisherman, but I do enjoy... Read More

Strategic Planning Fundamentals

Strategic planning is vital while starting a new business or... Read More

The 7 Critical Steps to Formulating Your Annual Strategic Business Plan

Businesses tend to avoid doing their annual business plan thinking... Read More

If You Dont Focus, Innovate and Evolve, You Die

After 128 years of business, a household word, Montgomery Wards,... Read More

Six Key Areas For Evaluating A Strategic Alliance

Strategic alliances are increasing at a rapid rate. It is... Read More

What is Your MSP?

For many consumers and producers, MSP is an acronym for... Read More

Elite Positioning Brings Higher Profits

Imagine spending the same amount of money on marketing and... Read More

How To Leverage Your Current Ideas And Products Into Multiple Revenue Streams

Diversify - to make diverse, give variety, to balance, to... Read More

Microsoft Great Plains Implementation: Placement/Recruiting Agency example ? overview for consultant

Microsoft Great Plains does wonderful ERP job for horizontal markets... Read More

How to Write a Business Plan Market Analysis

Writing a business plan is an essential part of the... Read More

Regroup - How To Do It And Why It Works

Regroup?is this a new management trend? Not a chance! Regroup... Read More

Secrets Of Effective Brainstorming

Have you been in a "brainstorming" session where each person... Read More

Strategic Acquisition Strategies for Small Businesses

Growth through acquisition should not be considered an option reserved... Read More

Microsoft Great Plains Implementation: Pharmaceutical Corporation Specifics ? overview

Microsoft Business Solutions Great Plains serves mid-size and large clients... Read More

The Chasm of Change---- Restructuring ----- The Goliath

Richard L. Daft one of the country's recognized academic leadership... Read More

Downers Grove limo Chicago ..