TIP750: Generating Alpha, Digital Payments, & AI w/ Deiya Pernas
Episode
55 min
Read time
2 min
Topics
Investing, Fundraising & VC, Leadership
AI-Generated Summary
Key Takeaways
- ✓Prediction Framework: Past financial trends show no correlation with future performance across companies. Instead of extrapolating historical revenue or earnings growth, analyze whether the business motor strengthening through improving customer value delivery, competitive positioning, and operational capabilities independent of current financials.
- ✓Portfolio Sizing: Apply Kelly Criterion principles where positions with 100% downside potential require smaller sizing regardless of upside. Maintain 15% cash reserves to deploy tactically during market dislocations. Initial position sizing matters more than averaging up in concentrated portfolios with five to fifteen percent core holdings.
- ✓Working Capital Analysis: Monitor changes in days sales outstanding and supplier payment terms as early warning signals. Small cap growth companies need negative working capital or improving trends to finance expansion internally. Deteriorating working capital combined with debt accumulation creates liquidity crises that destroy shareholder value.
- ✓Remittance Opportunity: Remitly trades under three times revenue with 40% growth despite operating in an $800 billion market growing six percent annually. Digital native platforms capture share from Western Union's $120 billion payment volume as cash-to-cash transfers migrate digital. Trust and brand matter more than price in cross-border money movement.
What It Covers
Deiya Pernas explains how his firm achieved 27.1% annualized returns since 2017 versus 14.7% for the S&P 500 through variant predictions, portfolio management discipline, and identifying share gainers in digital payments and AI-enabled manufacturing sectors.
Key Questions Answered
- •Prediction Framework: Past financial trends show no correlation with future performance across companies. Instead of extrapolating historical revenue or earnings growth, analyze whether the business motor strengthening through improving customer value delivery, competitive positioning, and operational capabilities independent of current financials.
- •Portfolio Sizing: Apply Kelly Criterion principles where positions with 100% downside potential require smaller sizing regardless of upside. Maintain 15% cash reserves to deploy tactically during market dislocations. Initial position sizing matters more than averaging up in concentrated portfolios with five to fifteen percent core holdings.
- •Working Capital Analysis: Monitor changes in days sales outstanding and supplier payment terms as early warning signals. Small cap growth companies need negative working capital or improving trends to finance expansion internally. Deteriorating working capital combined with debt accumulation creates liquidity crises that destroy shareholder value.
- •Remittance Opportunity: Remitly trades under three times revenue with 40% growth despite operating in an $800 billion market growing six percent annually. Digital native platforms capture share from Western Union's $120 billion payment volume as cash-to-cash transfers migrate digital. Trust and brand matter more than price in cross-border money movement.
Notable Moment
PayPal acquired remittance provider Xoom for one billion dollars in 2015 expecting rapid growth, but the business stagnated so badly they stopped mentioning it and cannot find buyers, demonstrating how complex optimizing payment corridors, fraud prevention, and regulatory compliance actually proves despite appearing simple.
Episode Transcript
You're listening to TIP. On today's episode, I'm joined by Daya Pernas. After a decade of experience in the investment industry, Daya co founded Pernas Research with his brother. Since January 2017, they've published audited net returns of 27.1% versus the S and P five hundred's average annualized return of 14.7% over that same time period. In this episode, we discuss their overall investing philosophy that has enabled them to crush the market, how we as investors can go about making predictions about an uncertain future, what poker taught Dea about effective portfolio management, the importance of understanding working capital, why Dea is attracted to the digital payment space and why he's long remitly in Wise PLC, the developments that Deya is following in AI, and much more. I'm really happy that we could get Deya on the show as he puts together top notch research and takes a unique approach to really understanding businesses and the value they generate for shareholders, which has led to vastly superior returns relative to his peers. So with that, I really hope you enjoy today's conversation with Deya Pernas. Since 2014 and through more than 180,000,000 downloads, we've studied the financial markets and read the books that influence self made billionaires the most. We keep you informed and prepared for the unexpected. Now for your host, Welcome to The Investor's Podcast. I'm your host, Clay Finck. And today I'm happy to be joined by Daya Purnas. Daya, so great to have you here. Clay Finck (3seven 50: Very happy to be here and, looking forward to the discussion. Clay Finck (3seven 50: So I've been really enjoying diving into your research in recent months, and I've just been eager to bring you on the show here to discuss a few different themes. Being a host of this show, I've looked at and reviewed the investment track record of several investors. And when I saw the track record that your team publishes, I was quite impressed to say the least. Since January 2017, you guys achieved a net return of 27.1% versus 14.7% for the S and P 500. So really looking forward to hopefully learning a thing or two from you here today. Before we get into some of the themes we're going to discuss, how about you just talk a little bit about your approach to markets and how you guys take a differentiated view to investing? Tim Herman (3zero thirty seven): To simplify things down, we really look for two things. We look for companies where their future state is going to be brighter than their current state. So it's all about the future relative to the current state. We believe investing is about predictions. It's about anticipating the future. I don't think it does anybody any good to just try to get an understanding of the president and current state without having some reason to try to conceptualize what that business is going to look like going forward. So that's …
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company
“PayPal acquired remittance provider Xoom for one billion dollars in 2015 expecting rapid growth, but the business stagnated so badly they stopped mentioning it and cannot find buyers.”
“PayPal acquired remittance provider Xoom for one billion dollars in 2015 expecting rapid growth, but the business stagnated so badly they stopped mentioning it and cannot find buyers.”
“Remitly trades under three times revenue with 40% growth despite operating in an $800 billion market growing six percent annually.”
“Digital native platforms capture share from Western Union's $120 billion payment volume as cash-to-cash transfers migrate digital.”
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