Unveiling the Winning Formula: Matthew Peterson’s Decade of Beating the Market

I had a wonderful interview last night with Matthew Peterson from Peterson Capital Management, and the entire session was simply mind-blowing! Matthew revealed a plethora of investment insights on how he managed to achieve a compounded annual growth rate of over 14% for his fund over the past 11 years.

Here are my key personal takeaways from the 75-minute-long interview. However, Matthew shared many more insights generously. If you want to watch the full interview, be sure to check out the entire Q&A on my YouTube channel!

  1. Embrace Volatility

I was astonished when Matthew refused to take credit for his fund’s consistent 14% annualized performance. He shared that his fund has experienced volatility.

A solid portfolio doesn’t mean it won’t fluctuate. Volatility is just a part of the journey. What’s most important is sticking to fundamentals: buying solid companies at extremely low prices and letting time work its magic.

2. Concentration Builds Wealth

It’s rare to find great businesses with a great business model, a great management team, and great prices. When opportunities like this arise, investors should be bold and take action. The greatest compounded return lies somewhere between 2 and 10 positions. Over-diversification will diminish the return.

3. Attractive Opportunities in Turkey

The stock market in Turkey is still inefficient. The country is facing high inflation with low-interest rates. However, many great businesses are able to generate growing revenue from foreign income while keeping their costs low domestically due to the depreciation of the Lira over the years. Numerous excellent businesses are selling at low PE multiples, presenting a great investing opportunity for patient investors.

4. Using Sell Put Options to Your Advantage

Selling put options allows investors to buy stocks at much cheaper prices than the market price. It helps investors potentially generate a double-digit return while promising to buy great businesses at great prices. It also allows investors to collect a premium in advance. This float can then be reinvested to further optimize portfolio returns. Warren Buffett has also used this strategy to buy great businesses like Coca-Cola.

5. Capital Allocation Is Key

Invest in companies with excellent capital allocation skills. Check out the board members of the company and assess their capital allocation skills.

If we need some investing ideas, we can check out the Securities and Exchange Commission’s (SEC) Form 13F to peek into what great value-based funds like Warren Buffett’s Berkshire Hathaway, Guy Spier’s Aquamarine Capital, or Bill Ackman’s Pershing Square Capital Management are investing in.

6. Bottom-Up Analysis

Instead of speculating on the next rising trend, sector rotation, or what will happen to interest rates (which are unknowable and uncontrollable), investors should focus on the fundamentals using bottom-up analysis and buy businesses that have great business models at attractive prices.

7. It’s Very Hard to Outperform the Market

Even professional investors frequently fail to outperform the market. For retail investors who are unable to keep up with the workload, simply buying the market is not something to be ashamed of.

Matthew said, “There’s no shame in doing something like this. You’ll probably beat most professionals just by buying the market, skipping all that nonsense, and doing whatever you want with your life!”

It’s extremely humbling for Matthew to say this, considering that his fund has consistently beaten the market for the past 11 years. Yet, he still says it openly and it shows how much he cares for my followers and retail investors. 

From this interview, I can absolutely feel the passion he has for his work and investing. I can’t wait to learn from him through his letters at Peterson Capital Management and hopefully during our next YouTube Live!

In the meantime, you can watch the full interview here!

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