Since 2017, Deiya Pernas and his brother at Pernas Research have compounded at 27.1% annualized net returns — nearly double the S&P 500. These results are audited. Very few investors anywhere can show this kind of outperformance over time.1
The foundation of their philosophy is simple but profound: always ask whether the motor of the business is strengthening. From there flows a set of principles that both Charlie Munger and Alex Karp would respect.
1. THE MOTOR TEST
ernas reduces investing to one repeated question: Is the motor of this business strengthening? The motor is the underlying system that creates customer value and future cash flows — network effects, switching costs, brand trust, distribution, or cost advantages.
Financials can look weak even as the motor gets stronger (investments depress margins), or look strong while the motor erodes (over-monetization, customer churn masked by accounting). The investor who sees the motor clearly gets a head start on future results.
Takeaway: Don’t value the car by how fast it’s moving today. Value it by whether the engine is being upgraded.
2. DON'T EXTRAPOLATE THE PAST
Many investors believe that if a company grew revenues at 10% annually for the last five years, it’s reasonable to assume that growth will continue. Pernas points out the flaw: the correlation between past and future financial growth is extremely weak. Stock prices sometimes exhibit momentum; financial results do not.
Most investors don’t appreciate this. They anchor to the past because it feels analytical, but it’s false comfort.
Takeaway: History doesn’t predict destiny. The next five years depend on whether the motor is strengthening, not on the slope of an old chart.
Members of Intelligent Investing get the full framework Pernas uses to analyze businesses week by week.
3. VARIANT INSIGHT
To outperform, your view of the future must be variant from the market’s baseline. Not contrarian for its own sake — variant because you see the motor strengthening where consensus doesn’t, or weakening where consensus is blind.
Takeaway: Edge comes from precise differences in how you see the future, not from noisy opposition.
4. PORTFOLIO DISCIPLINE
From poker, Pernas learned that even the best player goes broke without bankroll discipline. In investing, the equivalent is portfolio construction: position sizing, trims, and kill criteria.
If there is any credible path to zero, the position should be smaller, no matter how enticing the upside. Survival comes from discipline, not bravado.
Takeaway: Picking is not enough. Sizing and risk discipline are what turn ideas into compounding.
5. CASH AS FIREPOWER
Conventional wisdom calls cash a drag. Pernas disagrees. His team holds ~15% in cash, not to be defensive, but to avoid being forced sellers and to strike when dislocations appear.
Takeaway: Cash is not idle. It is stored firepower.
6. WORKING CAPITAL REVEALS THE MOAT
Working capital is often overlooked, yet it reveals hidden truths. If customers pay faster and suppliers slower, the business finances itself off its ecosystem — a sign of power, as with Costco. Rising working capital needs can drag on future cash flow.
Shifts in customer or supplier terms are often the earliest signal of strength or weakness in the motor.
Takeaway: Working capital is where moats — or leaks — show up first.
7. REMITTANCES & PAYMENTS: TRUST AS THE REAL MOAT
The global remittance market is nearly $1T annually and growing steadily. Pernas is long Remitly and Wise.
- Remitly: migrant-focused, digital native, corridor density, trust built through service.
- Wise: building global payment rails for businesses and banks.
Payment methods are sticky not because of code but because of trust, compliance, and infrastructure — all slow to build and hard to copy.
Takeaway: In money movement, trust and rails are the motor, not fees or app design.
8. STABLECOINS: HYPE COINTAINED
Despite headlines, stablecoin usage is still overwhelmingly inside crypto markets, not the real economy. Until local economies accept them for daily transactions, fiat remains sticky.
Takeaway: Adoption is far slower than narrative. Watch behavior, not hype.
9. AI AS A GENERAL-PURPOSE SHIFT
AI touches everything. Pernas studies it not to chase hype but to find ripple opportunities: energy for data centers, digital manufacturing for robotics, infrastructure providers.
Dynamism creates mispricing, because consensus struggles to value uncertainty.
Takeaway: You don’t need to pick the AI model winner. The edge may lie in the ecosystem it powers.
10. META 2022: CAPABILITY VS. NARRATIVE
In 2022, the market declared Meta finished — TikTok, Apple privacy changes, and metaverse losses. Pernas saw something different: the company’s capability to adapt. Reels growth and AI-driven ad optimization confirmed it. The position returned +300%.
Takeaway: Narratives misprice capability. The investor who recognizes operator adaptability before the numbers show it has the edge.
CLOSING
The lessons from Pernas Research are clear:
- Focus relentlessly on the motor.
- Don’t extrapolate past growth.
- Seek variant insights grounded in reality.
- Build discipline into portfolio management.
- Treat cash as offensive firepower.
- Study the plumbing of working capital.
- Respect trust and infrastructure in payments.
- Be sober about hype cycles.
- Look to the ecosystem around AI.
- Judge capability, not headlines.
This is a philosophy both Munger and Karp would respect: simple in principle, rigorous in execution, intolerant of illusion.
Discipline is the alpha. Variant insight is the multiplier.
THE PUBLIC VIEW VS. THE PRIVATE EDGE
This essay is part of our weekly Edge series. Members go further with interactive checkpoints and tools to turn insights into results.