The Pernas Portfolio
Our research philosophy
Most investors focus on what is visible: recent earnings, historical ROIC, trailing growth. We focus on the “motor,” the underlying forces that drive a company’s future. In a dynamic world, a firm’s future can look very different from its past. Our goal is to identify positive shifts in business trajectory early, before they appear in the financials and while the market is still looking backward.
Our goal
To be the gold standard in high-quality, accessible stock research, backed by the expertise and solid track records of professional investors.
Expertise
Outperformance
Alongside You
Actionable Stock Research To Your Inbox
Stock Ideas sent once a month and research highlights sent once a week
We identify stocks that fit into one of three categories:
Sample Reports
Frequently Asked Questions
We are of the opinion that there is a significant market opportunity for high-quality stock research. Many would say there is already a lot of research available, but if you look at most of the research out there, it is either from Wall Street-type institutions where the research is more “coverage” that lacks conviction and often contains inherent biases, or it is from “churn and burn” retail outfits that indiscriminately pump out stock ideas, cherry-pick their top-performing stocks for marketing, and often engage in other unethical tactics. So, in our view, trusted high-quality providers are few and far between.
Our track record is comprehensive and reflects all calls we got right and wrong. There will never be any cherry-picking of time windows, stock ideas, or any other charlatan tactics.
Pernas Research is founded on common sense, accountability, and transparency. And as a result, every single brick our business is built upon reflects a genuine desire to tangibly align our interest with our subscribers.
This is why we only communicate ideas that we would own ourselves. We’ve put our own money into the very same stocks we share and retain an unaffiliated third party to calculate and verify our performance on a quarterly basis.
We seek to identify attractively priced companies that fit into one of two categories:
- Strong companies becoming silently stronger – those with the potential to sustain and expand their future cash flows.
- Companies currently perceived as weak but getting stronger – those with cash flows that require improvement but have a clear path to recovery.
We believe that a portfolio structured with seven to twelve of these investments will compound at rates substantially greater than the market. These are the Core Ideas we publish research on to our subscribers.
Either value or growth stocks and ones weighted towards mid-cap and small-cap although we do not exclude large caps. Regionally speaking, we exclusively focus on developed countries and are heavily weighted towards the U.S. (~80% weight).
Our typical subscriber to our research has sufficient knowledge and experience to be able to evaluate risks when making their own investment decisions. Our reader base tilts heavily towards those that identify as experienced investors as opposed to traders or speculators.
In a complex and technologically dynamic world, the future of most firms can look very different from their past. We stay away from companies where we cannot reliably anticipate their forward-looking profit picture. For those companies where we can anticipate this, we use our investigative and analytical skill to unearth every possible source of high-signal information.
This involves understanding both the quantitative and the qualitative:
Quantitative (not limited to):
- unit economics
- historical financials
- industry and macro data
- web traffic
- social media traffic & app downloads
- survey data
Qualitative (not limited to):
- Talking to competitors
- Talking to vendors
- Talking to ex-employees
- Talking to industry experts
- Talking to current management
- Sifting through customer reviews
- Conducting proprietary surveys
- Understanding TAM and how it is changing
- Where possible, becoming users of the product or service ourselves
Once we have enough of an understanding of the company’s future, we begin to construct “forward-looking” financials that we then use to calculate a company’s intrinsic value. The best analysts ask all the right questions and have a resistance to well-sounding answers.
From a process we call “Iterative Pruning.” We are biased towards screens that have a high degree of turnover but here are a few of the screens we run: 52-week lows, decreasing debt levels, special dividends, declining revenue, increasing revenue, a high D&A-to-Capex ratio, and low EV/EBITDA. In addition, depending on the current flow of fear-based narratives, we often find ourselves taking a fresh look at subsectors that experience rapid selloffs.
After each screen, we are left with roughly 50 names which we spend 20-30 minutes researching and do our best to justifiably eliminate as many as we can. After the first round of elimination, this leaves us with roughly 25 names and we go through the list again but now increase our time spent on each name to roughly an hour and again prune the list further. We keep doing this until we are left with one or two names that we greenlight for a much deeper dive. (It is not uncommon for us to pass on the entire list of names).
We value idea-quality over idea-quantity and have intentionally structured our communications to be light on subscribers’ inbox. Subscribers to our research can expect to receive roughly 70 pieces of communication via email annually, which averages to a little over 1 email a week.
Here is what to expect:
- On the first of every month, we send a ~2000-word stock write-up along with a one-page summary.
- Once a quarter, we send our Quarterly Performance Letter.
- Every Wednesday, we send our ‘Stock Sonar’ which has brief and sometimes actionable takeaways from the top three companies we researched. (In addition to containing the latest snapshot of our entire portfolio).
- Ad hoc: A few times a year we send updates on any material adjustments in our portfolio.
We intend to charge for our research towards the end of this year. Since we are still a new company and fine-tuning our research communication and product-market fit, we decided to give all subscribers an extended trial period.
Yes, 100% independent. On more than one occasion, a company has reached out to us to inquire if we would be open to accepting payment to publish favorable research on their company. Even if this were a company that we liked enough to own, our answer is of course, “No, thank you,” because it would create a conflict of interest with our subscribers.
We do not manage outside capital. Pernas Research LLC manages assets in the Pernas Portfolio which is not open to outside investment.
To be the gold standard for a trusted research provider in the financial industry and to be respected as an organization that is unbelievably good at what they do.