TIP750: Generating Alpha, Digital Payments, & AI w/ Deiya Pernas
Timestamps are as accurate as they can be but may be slightly off. We encourage you to listen to the full context.
Podcast Summary
In this episode, host Clay Fink sits down with Daya Pernos, co-founder of Pernos Research, who has crushed market returns with an audited 27.1% net return since January 2017 versus the S&P 500's 14.7%. Daya shares his unique investment philosophy focused on finding companies where the "motor of the business" is strengthening (03:47), revealing how past financial performance has zero correlation with future results (07:14). The conversation explores his poker-inspired portfolio management techniques, the massive opportunity in digital payments driven by M2 money growth (25:29), and why companies like Remitly are perfectly positioned to capture the trillion-dollar remittance market as Western Union continues losing share to digital-native solutions (43:39).
Speakers
Daya Pernos
Co-founder of Pernos Research (with his brother) after a decade in the investment industry. Since January 2017, they've published audited net returns of 27.1% versus the S&P 500's 14.7%, leveraging insights from his poker background in the Air Force to develop superior portfolio management strategies.
Clay Fink (Host)
Host of The Investors Podcast, part of The Investor's Podcast Network with over 180 million downloads since 2014. He studies financial markets and the investment approaches that influence self-made billionaires, keeping listeners informed about market developments.
Key Takeaways
Focus on the Motor, Not the Metrics
Ask yourself: "Is the motor of the business strengthening?" Look beyond current financials to understand what's truly driving value creation and customer acquisition. (03:58) The motor and financials can diverge for extended periods, creating opportunity for those who see beneath surface-level performance.
Break Free from Financial Extrapolation
Past financial trends exhibit zero correlation with future performance—unlike stock returns, which actually show momentum. (06:02) Use historical data to build context about management responses and business cycles, never as the sole basis for predicting what comes next.
Master Portfolio Management Over Stock Picking
Superior returns come from bankroll discipline: size positions based on downside severity, not upside potential. (11:45) Run concentrated core positions (~15%), starter positions for fourth-inning research, and carefully sized speculative bets using Kelly Criterion principles.
Deploy Cash as Strategic Ammunition
Idle around 15% cash to pounce on market dislocations—never sell existing positions you like to buy something you like more. (14:15) Cash becomes an amplifier of returns when deployed aggressively during volatility, not a permanent drag on performance.
Seek Complexity Where Others See Commoditization
Target businesses that appear simple but hide deep operational complexity—like In-N-Out's burger quality or remittance providers' regulatory networks. (36:12) When "easy" businesses consistently fail to produce quality competitors, there's likely a hidden moat worth investigating.
Statistics & Facts
- Since January 2017, Pernos Research has achieved audited net returns of 27.1% versus the S&P 500's average annualized return of 14.7% over that same time period. (00:13)
- Global remittances are now over $800 billion per year according to the World Bank, with Daya noting the number is closer to a trillion now and continuing to grow by 6% annually, having outstripped foreign direct investment for emerging markets. (31:45)
- Data centers will consume about 2% of electricity usage by 2025, creating significant questions for grid infrastructure and alternative power sources. (55:12)
