Episode Summary
Executive Summary: The discussion centers on Peranis Research’s bottom-up, forward-looking investing style and how AI is reshaping software, marketing, consumer behavior, travel, cybersecurity, and capital allocation. Daya argues the market is still too complacent about AI disruption in SaaS, too rich in many software names, and underappreciating structural winners like vertical software, social ad spend, cybersecurity, and selected industrial/consumer brands with real traction and pricing power.
Main Topics: AI disruption and valuation risk in software: Daya argues SaaS is no longer a simple compounding story because AI is lowering software creation costs, changing pricing power, and making some business models more vulnerable. He sees the market as indiscriminate and still too expensive. Peranis’ investment philosophy: prediction over mean reversion: The firm rejects lazy value investing and emphasizes dynamic thesis updating, disconfirming evidence, and identifying structural change before it is fully reflected in earnings or multiples. Where software can still work: Vertical software, enterprise SaaS, and companies actively incorporating AI are seen as more defensible than horizontal or commoditized software. The firm looks for nuance in pricing models, distribution, and workflow stickiness. AI’s impact on SEO, advertising, and consumer search: Daya believes commercial search intent is shifting gradually from Google to LLMs, challenging SEO and some ad models, while increasing the importance of social advertising and firms with strong digital presence. Consumer spend rebalancing and category winners: Rising costs in essentials have reduced discretionary capacity, so many categories may not return to prior peaks. The firm prefers share-takers with durable brands rather than fad-driven or category-dependent businesses. Portfolio case studies: Remitly, Semrush, Capstone, Doc Martens: Examples illustrate the firm’s style: Semrush as an AI-disruption misunderstanding, Capstone as an industrial pivot benefiting from data-center demand, Remitly as a fundamentally strong but depressed name, and Doc Martens as a brand-driven consumer holding. Cybersecurity as a long-term beneficiary of AI-driven threats: Daya expects cybersecurity budgets to rise meaningfully as bad actors use AI, benefiting large incumbents and acquisition-driven platforms, though valuations are often too rich to buy aggressively.
Key Arguments: SaaS is still broadly overpriced; many mature names trade at 6-7x forward sales, while the firm prefers sub-5x sales before becoming interested. AI lowers the marginal cost of software development, compresses the moat of some SaaS businesses, and may shorten product build cycles from years to months. The market is not differentiating enough between enterprise, vertical, horizontal, consumer, or AI-adaptive software businesses. Mean reversion is unreliable in structurally changing markets; investors must predict future business contours rather than assume old trends will return. Commercial search behavior is shifting: instructional queries are moving toward LLMs, while commercial intent still largely lives with Google. As SEO weakens, social advertising should take more of the ad-spend pie; firms positioned there may benefit. Consumer wallets are under pressure because essential categories have outpaced wage growth, reducing the odds of a broad recovery in discretionary demand. Brand durability matters more than fad exposure; older, proven brands with strong identity can maintain share even in weak categories. Remitly remains attractive because digital remittances are growing with migration and mobile adoption, while stablecoins have not shown real-world disruption in normal remittance flows. Cybersecurity spending should rise as AI increases attack intensity, but large public leaders are expensive, pushing the firm toward selective smaller names or waiting for better prices.
Data Points: Peranis Research portfolio CAGR since 2017: over 30% - Audited real-money portfolio performance since tracking began Peranis Research 2025 portfolio return: over 52% - Mentioned as a strong recent year for the firm SaaS sector performance year-to-date: down about 10-15% - Referenced as evidence of sector weakness despite ongoing concerns Preferred valuation entry point for SaaS: below 5x EV/sales - Daya says this is where the firm starts getting interested Median SaaS valuations named: 6-7x EV/forward sales - Used to argue the complex remains expensive Semrush AI-related revenue share: 10-15% of revenues - Capital allocated to AI-related product development Semrush AI-related growth: about 30-40% - Growth rate of the AI solution segment OpenAI prompts per year: about 1 trillion prompts - Compared with Google to illustrate LLM engagement Google searches per year: about 5 trillion searches - Used to show Google still dominates overall search volume Consumer wages since end of 2020: up about 26% - Benchmark for household income growth in the rebalanced consumer-spend discussion Motor vehicle insurance cumulative increase: 63% - Example of essential-category inflation outpacing wages Electricity cumulative increase: 38% - Example of essential-category inflation outpacing wages Meats, poultry, fish, and eggs cumulative increase: 31% - Example of essential-category inflation outpacing wages Remitly revenue growth since investment: 30%+ - Used to show fundamentals remained strong despite stock weakness Cybersecurity attacks on businesses since 2023: up about 30% per year - Supports the case for rising cybersecurity budgets Cloudflare valuation reference: around 20x sales - Example of a cybersecurity-related name viewed as too expensive Palo Alto Networks scale: about $100+ billion market value - Illustrates size of the cybersecurity incumbents Consumer discretionary spending trend at Uber: Uber One customers spend 2-3x more - Anecdote used to support habit-based consumer observations
Pivotal Quotes: "if you're invested in a mature SaaS company trading at north of seven times EV to sales, I think there's just a lot of vulnerability there." — Daya Pernas: On why many software names still look expensive despite selloffs "Our whole investment philosophy is about leaning into prediction." — Daya Pernas: Explaining why the firm rejects mechanical mean reversion and focuses on forward-looking analysis "I think the allocation to cybersecurity is going to meaningfully increase for businesses." — Daya Pernas: His highest-conviction outlook for 2026 and beyond
Implications: Investors should expect more dispersion across software, ad-tech, consumer, and industrial names as AI changes moats and spend patterns. Winners will likely be those with real traction, pricing power, and adaptability; lazy mean reversion trades may keep failing.
From the Episode
Below five times EV to sales. So, despite the underperformance of SaaS last year, despite SaaS companies being down 10 to 15% this year, we still think they're overvalued. And there's another, I mean, if you're invested in a mature SaaS company trading at north of seven times EV to sales, I think there's just a lot of vulnerability there. And what we've seen so far really is just multiple compression. I don't think we've seen disruption risk really priced in the SaaS yet. So when you're You're saying multiple compression, that enterprise value to sales. You're saying enterprise values have come down. We haven't even really seen the sales, the denominator, really get hit. Have the concerns that people have been talking about with disruption to sales shown up in that denominator really at all in the industry? You've seen some sales slow down slightly with some horizontal type SaaS. It appears that companies are just a bit more cautious about SaaS spend.
Why problems are going to be fixed or problems are temporary. And you really have to anticipate what the future contours of that business are going to look like. So, our whole investment philosophy is about leaning into prediction. And obviously, you have to understand the historical financials and just how the site, is it a sickle type of business, ecosystem, and so on? But you have to put everything together in a forward-looking view. It's not enough to just look at past trends. And expect them to continue or expect them to reverse. That lazy type of thinking is completely decimated, and you have to really be concrete in how you're thinking about the future. So, when you look at the hundreds of SaaS names that are out there that are down tremendously, what are some of the larger companies that you look at and you say, yeah, I think the market has this right. This business is in trouble, whether it's pricing, as you said, or the actual product itself.
Is there anything in the questions you asked that you have the most confidence in looking forward that really has already taken up position in your portfolio and barring a major change? You see that staying the case for 2026? I think the allocation to cybersecurity is going to meaningfully increase for businesses. If you look at this, a good stat since about 2023, the number of amount of Cybersecurity tax businesses has been going up by something like 30% a year. So, because bad actors are using AI in different ways to kind of attack companies. So, the amount of spend that's being allocated by companies, the amount of energy and focus that has to be put into cybersecurity is going to continue to take more share. There's large companies, CrowdStrikes, Palo Alto networks of the world that will continue to benefit, I think, from those trends. They're already very, very large.
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