A Message From Our Founder
Thank you very much for your interest in Peridot Capital Management LLC. I founded the company more than a decade ago, shortly after the dot-com bubble burst and the technology industry downturn led to a recession and stock market decline of 50% for the S&P 500 and 80% for the Nasdaq. At that time I was meeting numerous people who had just been hammered by their technology-heavy investment portfolios. They were deeply angry at their brokers and mutual funds and many wanted to swear off stock market investing forever.
Knowing that such a rash decision, while understandable from an emotional perspective, was the wrong course of action if they wanted to reach their long-term investment objectives, I sensed that there was a need to help people get back on the right track. Doing so would require a different approach, but the time was right to create a better service offering than they had become accustomed to. And that is how my firm was born. Below you can read more about my investment philosophy and background.
Value-Oriented, Contrarian Investment Approach
Peridot Capital Management LLC manages client accounts using a long-term, contrarian, value-oriented investing approach. Our strategy is based on historical stock market data dating back to the 1800’s which shows a strong inverse correlation between stock valuations and future share price performance. Simply put, the better price you get when you buy something, the higher the future return you will earn, on average.
When looking for new investment opportunities, our core strategy is to focus on securities that the market is shunning in the short term. In the age of hedge fund day traders and the rapid electronic exchange of information, people react quickly and strongly to new information which dramatically affects day-to-day price movements in the market. This presents long-term investors with plenty of opportunities to find bargains. Our best investments are made when we find a strong company that has a bright future but has hit a temporary speed bump. When the bar for a company has been reset lower, the odds of its future performance exceeding expectations are high. Over time, as investors see the true underlying fundamentals of the company, the security should rise to a more reasonable estimate of fair value and substantial profits can then be realized.
The Importance of Valuation Cannot Be Understated
The following example illustrates why investing in companies that are simply doing well, without regard to the price you pay, can often lead to disappointing investment returns. Consider Wal-Mart in 1999. The retailing giant was growing rapidly and gaining market share with everyday low prices. Accordingly, the stock was a favorite among investors due to its perception as a great growth company.
What happened? The optimistic view on Wal-Mart’s business proved correct and their sales and profits surged. However, investors who bought the stock in 1999 and held it for the next 16 years actually did very poorly because they overpaid for their shares (see the charts below). This is a perfect example of why great companies do not always make great stocks. Price matters most!
More About Chad
Chad received his bachelor’s degree in finance from Washington University in St. Louis and has passed both the NASD Series 7 General Securities Representative exam and the Series 65 Uniform Investment Advisor exam. Prior to founding Peridot Capital Management LLC, he worked in the corporate finance department at Express Scripts, Inc, a Fortune 25 healthcare services and management company.
Chad has been featured in various business publications. For example, in late 2008 he was included in the BusinessWeek Annual Investment Outlook issue, where he highlighted worldwide beer leader Anheuser Busch InBev (BUD) as a bargain at $21 per share. The stock subsequently rose by more than 500%, hitting $125 by early 2015. Chad has also spoken at the University of Missouri (Columbia) Business School, as a guest lecturer to both undergraduate and MBA level students.
In addition, Chad served as a weekly columnist for StreetSideInvestor.com in the late 1990’s before launching his own investment blog, the Peridot Capitalist, in 2004. The site has been named one of the best investment blogs in the U.S. by several media sources, resulting in Chad’s commentary on various companies being featured in financial publications such as the Wall Street Journal & Bloomberg Business Week. His articles have been published on various investment web sites including Forbes.com and TheStreet.com as well.